The Roth IRA was born on January 1, 1998 as a result of the Taxpayer Relief Act of 1997. It’s named after former Senator William V. Roth, Jr. The Roth IRA provides no deduction for contributions, but instead provides a benefit that isn’t available for any other form of retirement savings: if you meet certain requirements, all earnings are tax free when you or your beneficiary withdraws them. Other benefits include avoiding the early distribution penalty on certain Roth IRA withdrawals, and avoiding the need to take minimum distributions after age 70½. Contributions to a Roth IRA are not tax-deductible, but earnings grow tax deferred and can be withdrawn tax-free in retirement after age 59 1/2 if the account has been in place for at least five years. In addition, the Roth IRA withdrawals may be permitted without penalty sets no maximum age limit for contributions and imposes no schedule for withdrawals. Roth IRA also incorporates a few other options. Both traditional and Roth IRAs allow withdrawals after age 59 1/2, but unlike the traditional IRA, a Roth will permit contributions after age 70 1/2 and does not require Roth IRA withdrawals on any particular schedule. After five years, a Roth IRA allows tax-free withdrawals for a first-time purchase (up to $10,000), disability or certain emergencies without penalty, up to the amount deposited.
Read the rest of this entry »