We all know how essential it is to have a retirement plan and how important it is to start contributing to it as soon as we can. A Roth IRA is an easy and convenient way to set aside money for retirement; it can be opened at just about any bank and it has the benefit of tax-free growth.
Roth IRA Qualifications
The biggest qualification for a Roth IRA is income; you need to have a specified maximum income in order to participate. This income doesn’t necessarily need to be partly or entirely from wages, it can include such things as fees, commissions and even rental income and royalty payments.
As of mid-2010, the earnings limits are as follows:
If you file your taxes either singly or as married filing singly, you are allowed to declare earnings of $105,000; if married and filing jointly, the earnings limit for husband and wife combined is $167,000. There are no age limits with a Roth IRA plan, although there are restrictions on the amount that can be contributed in a year.
Roth IRA Withdrawal
It is possible to make a Roth IRA withdrawal, although there are various qualifications that you must meet. There are no penalties and no tax is paid to withdraw, as long as the money has been in the account for at least five years. To withdraw, you also have to be older than 59 and a half; or the money is needed to buy a first home or in case of death or disability. If you don’t meet these requirements, it’s still possible to withdraw your money, although you will have to pay various taxes.
If you meet the Roth IRA qualifications, it makes an excellent retirement plan, with several advantages over other plans. The sooner you open your account, the sooner you can start looking ahead to retirement.