Anyone know about a "Roth IRA"?

Question

My mom wants to know if when you take the money from the account, do you have to pay taxes on the intrest earned? All answers appreciated.

Answer 1

The money you put into the account has already been taxed as regular income, so when you take the money out you are not taxed again. Traditional IRAs put money into the IRA account as pre-tax dollars, so you save now but you are charged taxes later when you do take money out. The tax-free advantages of the Roth-IRA, however, only apply if you take the money out after you turn 59 1/2 years old. Otherwise, if you take the money out early, there will be a penalty including tax consequences (this is true for both the Roth and the Traditional IRA).

Answer 2

That's the beauty of the Roth. As long as you hold the money in the account for 5 years and have reached the age 59 1/2, there are no taxes or penalties paid for Roth distributions. Maybe she's thinking about the nondeductible IRAs. When that started, back in 1986 I believe, you end up with an IRA that has "basis", and need to do a special form with your tax return when you make withdrawals from the nondeductible IRA. That form calculates how much of your distribution is from the IRA principal and how much is interest.

Also, there are some ways of getting distributions from a Roth before your 59 1/2 without paying tax, but I don't think that's the info you're looking for right now.

Answer 3

will be taxed on interested earned before 59 and 1/2, but no tax or tax free of your contribution.

for example, you put in 10000, interested earn is 2000, you pay tax on the 2000 if you take it out 12000.00

Answer 4

no taxes on the interest earned in a roth watch the age issue however must be 59.5 yrs old

Answer 5

no taxes or fees. as long as you don't take it out before you are supposed to. (i think the age is 59.5 yrs when you are allowed to withdraw from it tax/fee free.)