Simply put, a Roth plan is one of the 2 types of individual retirement accounts provided by the United States government. The other type is a regular individual retirement account or IRA for short. The Roth IRA differs from the regular IRA in many ways, but before going into that, let us look into who needs a retirement account and what are the reasons for this account to be taken.
To begin, everyone needs a retirement account. It does not matter what kind of job you do, you are eventually going to retire one day. And it is this day that your retirement account will come into play, providing you with money when you need it the most, especially with no source of income. With the current economic scenario, it becomes more important than ever that you open a retirement account right away, since time is running out by the minute. Costs are rising everywhere you look, and in most probability, they will continue to rise in the future. What you can afford with your present income may not be affordable in a few years time, provided the income is kept constant. When such a situation arises, it can only be wondered about what might happen after you have retired and there is no income source, and you have to survive. Well, the answer is, you can draw from your retirement account to have a worry free post retirement life, given of course, that you actually have a retirement account in the first place. So what we basically mean is this – everyone needs a retirement account. If you are reading this now, you need to begin working on opening one immediately, if you haven’t already.
So what is it that a Roth IRA offers that others don’t? One word – tax-free. That’s right, the money you invest in a Roth IRA will be tax free when you wish to draw it, which means you have a tax free income source after you retire, courtesy the Roth IRA. This is a special IRA that the government offers, so that middle class people can afford a decent life after they have retired. So who benefits the most from a Roth IRA plan? People who expect their tax rates to increase as they near retirement, or people who expect their general tax bracket to increase anytime in the future can avail the Roth IRA to make a fantastic choice. Not only are Roth IRA plan contributions tax free, but you can also tap these contributions according to the time and tax rate. Thus it does not matter how much you earn, or can afford to store in the Roth IRA plan; any money that you put in will be tax free.
The Roth IRA plan comes with its own set of rules, however, and any incompliance towards these rules could put your money in risk. First up, the eligibility. If you earn above a certain amount of money, you cannot contribute to the Roth IRA plan, which varies depending on whether you are filing for a Roth IRA as an individual or as a group (with your spouse). As an individual, if you are filing then you can contribute an amount of maximum $5500, provided your adjusted gross income does not cross $110,000. If you are filing as a couple, then the limit increases to $173,000. If you do not earn less than the contributing limit, you may only contribute a maximum of how much you earn.
Apart from being a safe and secure retirement savings plan, a Roth IRA also has a few other benefits, which include drawing of money at any time, tax free, no mandatory withdrawing and saving while in retirement. All money in a Roth IRA is 100% tax free, for you to draw at any time. While it is generally expected for the account holder to have the account open for at least 5 years, you can withdraw any amount during this time penalty and tax free. Also, unlike traditional IRA plans, you don’t have to compulsorily withdraw any money, thus removing any kind of pressure. Plus, you can save for retirement if you choose to continue to work, for as long as you wish. Traditional IRAs require you to stop working at 70, but a Roth IRA has no such restriction, apart from staying within the earning limits. For many, a Roth IRA plan may be a better option compared to traditional IRA plans.
More and more Americans are discovering that their investments are dwindling due to inflation and increased cost of living. Whether they have their cash invested in an IRA, real estate or equity in a business or any other assets, these retirement plan options don’t seem to be as reliable as they once were. A very popular solution right now, is converting a percentage of assets and cash into Gold Bullion or Gold Coins, and holding the Gold within your IRA.
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