I'm a little interesting in saving for retirement and I heard somewhere that young workers should get a Roth IRA. What is it? How much could it cost me to save up for retirement. (I'm in my mid-20's and live in Cali if that helps!)
2007-08-01 22:08:31 · 5 answers · asked by ♥☺ bratiskim∞! ☺♥ 6 in Business & Finance ➔ Personal Finance
A Roth IRA is the governments answer to the fact that the younger generation won't have Social Security to fall back on when we retire. As you are in your 20's, you can contribute up to $4,000/year to your Roth IRA. Unlike an IRA, you won't be able to deduct your contributions from your taxes for this year. When you retire you are able to withdraw your money without having to pay any taxes.
Hope this helps.
2007-08-02 01:39:52 · answer #1 · answered by dfrank04401 3 · 1⤊ 0⤋
A Roth IRA is a Roth Individual Retirement Account. The name comes from the congressman who proposed the bill that allowed this type of account to become legal.
In a traditional IRA or a 401(k) program the money you put in is done with before tax money. That money is allowed to grow tax free, but you pay taxes on it when it is withdrawn (at age 59 1/2 or older). A traditional IRA or 401(k) has an age at which you MUST start to withdraw money from it (70 1/2).
In a Roth IRA the money is put into the account after you have paid taxes on the money, from the take home portion of your check. That is why it isn't deductible on your income taxes. Since you paid tax on the money when it went in they don't tax the gains and don't tax you when you take the money out. The reason it is such a fantastic deal, especially for younger people, is you have more time until retirement to really let that money grow!
Two other benefits to a Roth IRA. If for some reason you really need the money back that you have put in you are allowed to withdraw your contributions without taxes or penalties (you can't put it back, though, so it should be used as a last resort) since the money you put was already taxed. Try that with a traditional IRA and you'll pay taxes and try it with a 401(k) and you'll pay taxes and a penalty. The other benefit is not having to withdraw money at 70 1/2 years old if you don't need it, allowing it to continue to grow and grow.
In short, it is a fantastic deal and you should really fund it. It should be the second highest retirement priority, after getting the matching funds from your employer in a 401(k) plan (if they offer any matching at all).
2007-08-02 04:46:27 · answer #2 · answered by Rush is a band 7 · 1⤊ 0⤋
Here's a good site that explains the Roth IRA in detail.
http://en.wikipedia.org/wiki/Roth_ira
Does your employer offer a 401k or other type of retirement?
It's generally best to max the 401k first then use the IRA.
2007-08-01 23:39:22 · answer #3 · answered by mister_galager 5 · 2⤊ 0⤋
money invested grows tax free....great deal...so if you have accumulated leets say 100k by the time you retire, then that is what you get...no taxes. you area allowed to put into a roth 4k per year for now...it will increase as time goes on. set up an account with vanguard or fidelity...they are the best mutual fund companies and have the lowest fees
2007-08-02 03:44:09 · answer #4 · answered by zioncanyon 3 · 1⤊ 0⤋
Roth IRA claims to have invented the internet but we all know it was Mr. Gore.
2007-08-01 22:18:04 · answer #5 · answered by NONAME 2 · 0⤊ 3⤋