Robert D. House, Certified IRA Specialist

Introduction to Roth IRAs

The First Step is taking Stock...

A Roth IRA is a retirement savings vehicle that allows eligible individuals to save for retirement by contributing up a certain amount each year. Earnings on investments in a Roth IRA grow on a tax-deferred basis, but are tax-free if distributions are qualified. This is a very attractive feature, as earnings accrue on earnings, resulting in a compounding effect and larger balances.

 

A Roth IRA must be established with a financial institution that is approved by the IRS to serve as custodian or trustee. This includes banks, credit unions, insurance companies and brokerage firms

 

When you establish a Roth IRA with a financial institution, you must be provided with a Roth IRA adoption agreement and disclosure statement and the financial institutions financial disclosure. These explain the terms and conditions of the agreement, which includes information about fees, penalties, contributions rules, distribution rules and investment rules. Your Roth IRA is not considered established until you sign the adoption agreement.

 

If the Roth IRA is not already established, it must be established by your tax filing due date, which is usually April 15 of the year following the year to which the contribution applies.

 

There is no denying that saving in an IRA is an attractive means of funding one’s retirement nest egg. But since there are two types of IRAs available, the Traditional IRA and the Roth IRA, choosing the right one can be challenging. In this article, we highlight some of the similarities and difference of these two types of IRAs. These are the factors that usually determine which of the two an individual chooses.

 

 

 

Robert House