I must say, if you can possibly afford to fund a Roth IRA, by all means…DO IT!
A Roth IRA is an Individual Retirement Account (IRA) that is basically funded with post (after-tax) monies.
Named for its chief legislative sponsor, Senator William Roth of Delaware, a Roth IRA differs in several significant ways from other IRAs.
In contrast to a traditional IRA, contributions to a Roth IRA are not tax-deductible. BUT…what’s great is, when you start to withdraw money from a Roth IRA, they are tax-free! Also, the advantage of the Roth IRA over a traditional IRA is that there are fewer withdrawal restrictions and requirements. Even better, transactions inside the Roth IRA account (including capital gains, dividends, and interest) don’t incur a current tax liability!
Withdrawals are generally tax free when the account has been opened for at least 5 years and the owner’s age is at least 59 ½.
Many brokerage firms (e.g., Fidelity, Vanguard, T.Rowe Price, just to name a few) offer Roth IRAS. According to Kiplinger’s Retirement Report (May issue) starting this year (2008), you can now roll funds from your company plan into Roth IRAS IF you have an adjusted gross income of $100,000 or less (good news: the cap ends after 2009!).
Caution: The rollovers are taxable, but no 20% withholding is required.
~Joan Jackson, Publisher, The Baby Boomer Resource Center.com
