Thursday, January 1, 2015

Top 10 Roth IRA Tips

Starting a Roth Individual Retirement Account (IRA) is one of the best moves you can make towards securing your financial future. Roth IRA's are good choice as they advantages such as 
  • Tax free income in retirement
  • More flexible withdrawal options than traditional IRA's.
  • Contribution allowed after age 70 1/2.
  • High earners can contribute through a "back door".
  • Protects against future tax increases.
Setting up Roth IRA account is not not as complicated as you think, and you can get started as early as today. Choose where you will open your Roth IRA account. Investing advisors can help you choose one of the best Roth IRA providers for your Roth IRA account. Here are some simple tips to help you along the way.

1. Start early.  The best way to plan for retirement is to start early. Starting early, rather than waiting for some years could mean you take larger chunk of money, when you quit your job.

2. Contribute to a 401(k) first. If your employer offers any kind of matching program for your 401(k), your first priority should be to contribute as much as possible to that plan. Only after you've maxed out their matching offer should you look elsewhere. A Roth IRA will be one of your best options after that.

3. Forgot last year? You may still have time. You can contribute to your Roth IRA for the previous year all the way up to the date you file your taxes. As long as you had taxable income the year before, you can contribute the maximum for last year, and even start making contributions for this year so you don't forget again.

4. You're never too young. There is no minimum age threshold for Roth IRAs, so even minors can hold an account. You do have to have taxable income though; your allowance doesn't count!

5. You're never too old. Roth IRAs aren't just for spring chickens. In fact, if you're over 50 years old you can make additional "catch up" contributions of $1,000 per year over the normal limit.

6. Your money isn't locked away forever. You don't have to hesitate about contributing to your Roth IRA and not being able to access that money until retirement, because you can actually take it out at any time. Since the money was already taxed before you put it in, there are several situations in which you won't pay anything at all to take it out. For example, if you need to buy a house, have a major medical expense, or want to fund higher education, you can withdraw money without penalty.

7. Comparison shop. Your local bank or financial institution will probably have a Roth IRA plan available, but it might not be best suited for your needs. This popular retirement option is now offered by numerous financial outlets, both offline and online, so researching your options is essential in order find the plan that best suits your needs.

8. Make it a priority. Financially speaking, your Roth IRA is one of the best places you can have your assets. If you have to choose between funding an educational account for your children and putting money away for retirement, try to lean towards retirement. Simply put, there are a number of programs that will help your children fund their education at low cost, but the same can't be said for your retirement.

9. If you have a traditional IRA, consider converting. Roth IRAs, which came into existence long after the traditional version, have many advantages, even for older investors. They grow completely tax-free, so when you take the money out to fund your retirement you won't have to worry about paying a dime to Uncle Sam.

10. Diversify. Even though a Roth IRA is a powerful investment tool, it probably won't be enough to pay for your retirement by itself. The maximum contribution for 2015 is $5,500 and $6,500 if you're age is 50 or above. To secure your financial future, use a Roth IRA in addition to a company savings plan and your own personal investments.