Things To Consider Before Opening An IRA

When it comes to your retirement planning, there are a plethora of things you’re expected to consider, apply to, and implement to ensure a safe and happy retirement. Of course, there are also a number of different things that should be considered before beginning a specific retirement plan. In terms of your options, a Roth IRA is a popular choice for many, and for a number of reasons. Though before beginning this type of retirement account, it’s important to look at some of the important aspects of what it entails and what it might mean for you.

What Is A Roth IRA?

In short, a Roth IRA account is a nondeductible IRA that permits a tax-free withdrawal, pending specific conditions are met. Most of the time, the contribution limits are similar to a normal IRA, the lack of need to pay taxes on the earnings is a huge upside to opening this type of account up.

Your Employer Might Offer This Option

A number of companies are adopting the idea of a Roth IRA within their 401(k) plans. This after-tax money goes into the Roth, so immediate tax savings aren’t seen just yet. The upside here is that your contributions will grow tax free. It’s important to note that these contributions must be made by December 31st to count for current tax years.

You Must Pass A Few Tests

To be tax and penalty free with withdrawals, you must be over the age of 59 ½. If you’re not, you could be looking at a 10% penalty for early withdrawals, if done before then. Additionally, you must have one Roth open for at least five years. Alternatively, if you open a Roth at 58, you can tap the earnings penalty-free at 59 ½, but can’t tap anything tax free until five years from the open date.

If you’re interested in learning more about Roth IRA’s and retirement planning, make sure you contact the professional team at American Investment Planners, LLC We are here to make everything as simple as possible. To schedule an appointment with one of our advisors, please call (516) 932-5130 or email info@americaninvestmentplanners.com.