What is Roth Ira?

Question

I want to invest money and gain the most interest. I heard Roth IRA can yield up to 10%, but is that witin one year, two. Can I take it out after a year or two? I'm new to all this.

Answer 1

Things you should be aware of before listening to what other people say:
1) Interests, dividends, and capital gains are not guaranteed. Your portfolio may gain or lose value.
2) Investments are not FDIC insured.

Now to answer your question what is a Roth IRA. A Roth IRA is a tax-deferred retirement account. That means, you are saving your money toward retirement. If you withdraw any money during first two years, the IRS will penalize you with a 25% tax. After first two years to age 59 1/2, any withdrawals will be taxed at 10%. There are exceptions to that rule. You will not be hit with a 10% early withdrawal tax if:
1) You are buying your first home (only up to $10,000 can be withdrawn)
2) You are paying for higher education.
3) You are terminally ill.
4) You are disabled.
There are other exceptions, which you can read at: http://obe231.blogspot.com/2006/12/individual-retirement-account.html

Anyway, after age 59 1/2, you can start withdrawing your money without having to pay any taxes (thats why Roth IRAs are always better than Traditional IRAs).

If you need money in the short term, I would invest in money market accounts or online savings accounts that earn at least 5% interest.

Answer 2

A Roth is a retirement account that you can fund with after-tax dollars, and the withdraw after age 59 1/2 without paying taxes. It's an alternative to Traditional IRAs, which you fund with pre-tax dollars, but have to pay tax on when you withdraw the funds (after age 59 1/2).

If this is money you want to use in a year or two, then put it in a high-yielding savings account, such as those offered by INGDirect. IRA's are for Retirement, that's what the "R" stands for!

Answer 3

Roth IRAs are tax free retirement funds. You can deposit up to $4400 per year into the IRA and you won't have to start paying taxes on it until you retire and start withdrawing.

Answer 4

See this wikipedia information. There is some eligibility term for the intrests & minimum contribution.