Increase Retirements Benefits: Open a Roth IRA

A retirement account is a savings account that allows an individual to set aside part of his income for when he would like to be finally rid of the daily grind of making a living.  In other words, it is a vehicle to ensure security when one retires from the rat race.  Of course the government has put in place the Social Security for taxpayers.  However, to be realistic about it, one cannot rely on the expected benefits from Social Security to support the lifestyle you were used to while employed.

In order to remedy this, the government has encouraged taxpayers to participate in retirement plans to augment their Social Security benefits.  One solution that is being promoted is to open a Roth IRA account where you can set aside monies and invest these to allow your funds to grow without being taxed.  Opening a Roth IRA account can allow you so many benefits that it is preferred by so many. This leads you to ask, "What is Roth IRA?"

Roth IRA accounts allow you set aside portions of your salary via an insurance broker who acts as custodian for the account.  Maximum contribution limits are much higher than with other account so much so that it enables you set aside more.  Deciding to open a Roth IRA now will enable you to make tax-free withdrawals from the account tax-free during your retirement. But if you have sufficient resources to see you through your retirement years, you do not have to make minimum withdrawals at the age of 70 1/2 just like in other account types.  A Roth IRA account can even be inherited. Hence you can leave the account, together with all assets contained therein, to your heirs.

When you open a Roth IRA account, the law requires you to appoint a custodian or a trustee who is given the task of informing you about the transactions you can do and cannot do in order to avoid paying penalties.  A Roth IRA practically does not have any prohibitions with regard to the type of investments that you wish to make except for life insurance and collectibles. It is the duty of the custodian to assist you in making the investments that you choose for your account, other than his administrative and record-keeping function for the account. 

You must be able to differentiate this type of account from others before you decide to open a Roth IRA in order to determine whether it would suit your circumstances and retirement goals.  If you already have a 401K account with your employer, chances are you have matching contributions from your employer.  These are free monies that you cannot afford to lose.  Owning a 401K account also allows you to save without paying taxes on your contributions. The same rules apply to a traditional IRA wherein both accounts allow paying contributions free of tax.  So you ask yourself: "What is Roth IRA and how can it be better than other retirement accounts?"  A Roth IRA, even if contributions are paid with after-tax dollars, allows your account to generate income from its investments tax-free.  When you retire, you will be able to make qualified withdrawals, inclusive of all its income, also tax-free.


And so, having established the advantages of a Roth IRA, you should be aware that there are different methods of opening this account. You are allowed to open a Roth IRA on top of your existing retirement account as a supplement.  You are likewise permitted to rollover your entire retirement account into a Roth IRA or you can opt for a partial rollover.  Rollovers are bound by specific IRS rules especially if your present account contains pre-tax dollars.  Hence, it is imperative to seek expert financial advice so as not to run afoul of the law.

Open a Roth IRA

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