ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel
  • »
  • Personal Finance»
  • Retirement

Roth IRA Basics

Updated on July 15, 2011

What You Need to Know About Roth IRAs

Because the Roth IRA has been deemed by most retirees as the most efficient individual retirement account, more and more people are beginning to realize the great benefits and profit potential this plan can grant them in their retirement years. But before you open your own Roth IRA, it is very important that you gain knowledge of the Roth IRA basics that can provide you essential information about this advantageous retirement account.

The Roth IRA is mandated by the tax law of the United States, whereas its name came from the late Senator William Roth of Delaware, the chief legislative sponsor of this retirement investing option. The Roth retirement account was recognized by the Public Law 105-34, commonly known as the Taxpayer Relief Act of 1997. The best Roth IRA advice and most common types of assets that you can invest in through a Roth IRA are mutual funds, common stocks, certificates of deposit, derivatives, notes, securities and even the real estate.

Outline of the Roth IRA Basics

The Roth IRA basics outline the specific requirements and filing status’ prerequisites as directed by the Internal Revenue Service (IRS) that will determine if you are eligible to open a Roth IRA. The most acknowledged benefit of a Roth plan is its distinct tax structure. There are limitations on the contributions you can make each year, wherein you are only allowed to add funds to your account smaller than your modified adjusted gross income (MAGI) or compensation. As for 2009, contributors are only permitted to contribute not more than $5,000. Contributors who are fifty years of age or more than fifty years of age are allowed to make additional contributions up to $1,000, referred as catch up contributions.

Do you know how to open a Roth IRA? You will only become eligible to open a Roth account if you fall under the income limits. If your filing status is single filer, you qualify for full contribution if your salary is up to $105,000 and up to $105,000 to $120,000 for partial contribution. As a joint filer, your compensation must be up to $166,000 for full contribution and up to $166,000 to $176,000 for partial contribution. For married filing separately, income should be up to $0 for full contribution and up to $0 to $10,000 for partial contribution.

Traditional IRA and the Roth IRA

There are significant differences between the Roth vs Traditional IRA. Learning about these will help you decide what particular individual retirement plan suits your needs for your retirement. The tax for Traditional IRA are tax-deductible, Roth IRA on the other hand are made up of contributions that are not tax-deductible. Due to this, all withdrawals or distributions that you will carry out in the future are commonly tax-free, though there are specific stipulations that govern this privilege. You can only enjoy a tax-free withdrawal if your account has been open and active at least five years for principal distributions and your age is at least 59 ½ years if you want to withdraw growth portion above principal value.

If you learn about the Roth IRA basics you will recognize that it has fewer Roth IRA limitations, withdrawal restrictions, regulations and requirements. Moreover, the transactions within your Roth IRA, which may incorporate dividends, interest and capital gains, will not incur current tax liability under the tax law.

What can a Roth IRA do for you?


    0 of 8192 characters used
    Post Comment

    No comments yet.


    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at: ""

    Show Details
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized. (Privacy Policy)
    CloudflareThis is used to quickly and efficiently deliver files such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the or domains, for performance and efficiency reasons. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisements has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)