The account was established as part of the Taxpayer Relief Act of 1997 and is named after the late Senator William V. Roth, Jr. The account’s main benefit is that when certain requirements are met, it offers tax free growth, making it a very attractive account for many. Roth IRAs were established to help working people save for retirement. There are some restrictions on who can open these accounts and what the dollar amount is that can be contributed each year, depending on your income level. Mutual funds can contain any combination of mutual funds, stocks, bonds and even real estate.
Roth IRAs carry some advantages that make them attractive to investors. First, they are simple accounts and do not require any special reporting to the IRS. While there is no tax advantage up front for investing into an IRA, on the flip side you will not pay any taxes on your investment.
Another advantage is the lack of fees when you need to make a withdrawal. In most cases, there is not an early distribution penalty. In the same token, unlike other retirement accounts, you do not have to start taking withdrawals by a certain age. If you do not need the money you can let it sit and continue to grow. Another words, money is easy to get to if you need it and if you don’t, you can let your account continue to grow.
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