An individual retirement account that offers possible tax FREE earnings as long as the five-year waiting period is satisfied and qualifying distribution rules are met.
- If you put $500 of after tax money into a Roth IRA, the $500 – and additional money you deposit each year – will grow tax-free through interest in the Roth IRA.
- When you begin to withdraw money from your IRA, let’s say $1,000, you will pay no taxes on that amount as long as certain qualifications are met.
- Unlike Traditional IRAs, Roth IRA contributions are made after taxes.
- Roth IRAs are also different from Traditional IRAs, in that, there is no maximum age to open or contribute to a Roth IRA and contributions may continue after the age of 70 1/2 as long as you have earned income.
- Your modified adjusted gross income must be below a certain level in order to make a deposits into a Roth IRA.
- Unlike a Traditional IRA, you are not required to take mandatory distributions at any time during your lifetime.
- The money you withdraw will not be taxed, if certain qualifications are met.