Roth IRA is a type of retirement plan available for the people of US.
There are certain conditions to be met to avail this plan.
The major benefit of Roth IRA plan is that people under this plan have tax exemptions for a limited amount.
You might ask that what difference it has from a usual retirement plan which has tax exemptions.
I will answer the question.
The major difference is that while most of the usual retirement plans have tax benefits for money placed in the plan, in Roth IRA tax exemption is given on money which is withdrawn at the time of retirement.
This plan is named after the late Senator William Roth of Delaware who was the chief sponsor of this plan.
This law was established under the Taxpayer Relief Act of the year 1997.
Now I will tell you about the advantages and disadvantages of this plan.
A major advantage is that after you reach the age of 59 1/2 your withdrawals of your retirement plan money is not taxed.
In other retirement plans, the income withdrawn is taxed under the purview of ordinary income tax.
Another advantage is that if the beneficiary dies and a relative is taking care of the things, he or she can integrate his or her Roth IRA plan and that of the deceased, without any penalty or complications.
Unlike social security funds, Roth Individual Retirement Account can be passed on to heirs.
Now we will see the disadvantages.
The contributions which come to Roth IRA plans are not tax deductible.
Note that contributions which come to ordinary IRA plans are tax deductible, even if it is in certain income limits.
Another major disadvantage is that Roth IRA is not so beneficial to the high income groups who pay high income taxes.
This is because a substantial amount of money is already deducted in the name of income tax.
Due to certain rule changes which happens in Roth IRA according to the decisions taking place in the Congress, it is considered safer to have a normal IRA plan.
Now let us see what the eligibility criteria for availing this plan are.
The contributions to Roth IRA plans have been restricted by the orders of the Congress to certain income limits.
The limit is depended on Modified Adjusted Gross Income (MAGI).
There are also conversion limits existing.
More can be found out about this by further research.
This plan changes year by year according to newer regulations given by the Congress.
So, someone who is availing or planning to avail this plan should be very watchful of the changes which are happening in the conditions and structure of the plan.
Otherwise you will not get the expected result.
The seasoning period of this plan is usually five years.
Also, a proper justification for retirement should be given (either retirement age which is 59 and ½ or disability).
Note also that interests earned on Roth IRA's may be subjected to penalty.
Avail this plan only after a good study of your retirement options.
There are certain conditions to be met to avail this plan.
The major benefit of Roth IRA plan is that people under this plan have tax exemptions for a limited amount.
You might ask that what difference it has from a usual retirement plan which has tax exemptions.
I will answer the question.
The major difference is that while most of the usual retirement plans have tax benefits for money placed in the plan, in Roth IRA tax exemption is given on money which is withdrawn at the time of retirement.
This plan is named after the late Senator William Roth of Delaware who was the chief sponsor of this plan.
This law was established under the Taxpayer Relief Act of the year 1997.
Now I will tell you about the advantages and disadvantages of this plan.
A major advantage is that after you reach the age of 59 1/2 your withdrawals of your retirement plan money is not taxed.
In other retirement plans, the income withdrawn is taxed under the purview of ordinary income tax.
Another advantage is that if the beneficiary dies and a relative is taking care of the things, he or she can integrate his or her Roth IRA plan and that of the deceased, without any penalty or complications.
Unlike social security funds, Roth Individual Retirement Account can be passed on to heirs.
Now we will see the disadvantages.
The contributions which come to Roth IRA plans are not tax deductible.
Note that contributions which come to ordinary IRA plans are tax deductible, even if it is in certain income limits.
Another major disadvantage is that Roth IRA is not so beneficial to the high income groups who pay high income taxes.
This is because a substantial amount of money is already deducted in the name of income tax.
Due to certain rule changes which happens in Roth IRA according to the decisions taking place in the Congress, it is considered safer to have a normal IRA plan.
Now let us see what the eligibility criteria for availing this plan are.
The contributions to Roth IRA plans have been restricted by the orders of the Congress to certain income limits.
The limit is depended on Modified Adjusted Gross Income (MAGI).
There are also conversion limits existing.
More can be found out about this by further research.
This plan changes year by year according to newer regulations given by the Congress.
So, someone who is availing or planning to avail this plan should be very watchful of the changes which are happening in the conditions and structure of the plan.
Otherwise you will not get the expected result.
The seasoning period of this plan is usually five years.
Also, a proper justification for retirement should be given (either retirement age which is 59 and ½ or disability).
Note also that interests earned on Roth IRA's may be subjected to penalty.
Avail this plan only after a good study of your retirement options.
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