How The Roth IRA Rules Apply To You
Roth IRA rules have changed slightly in the 2010 tax year. If you’re familiar with the basic rules, they are about the same as they were in 2009, so you probably know what it’s all about. In case you’ve missed out on this Individual Retirement Account before, you should read on to get the basics down and know where you’re headed in the future.
IRA accounts are good to make your own contribution towards your retirement. If you want to put money where you can see it until you get to the age when you want to settle down, they’re your best bet. The rules also make the intentions of William Roth, the main legislating senator, clear. The rules say that you can’t take out distributions until you’re at least 59.5 years of age and have had the account for at least five years.
Actually, you can but the amount will be subject to income taxes, which is prohibitive considering that you’ve already paid taxes on money you deposit into the Roth IRA account. In 2009 the maximal contribution per individual was $5,000 per tax year, or one grand more in case they were in ‘catch up’ mode. Catch up contributions can be made as long as the person making them is over 50 years old.
In 2010 the numbers have not changed, despite the fact that it’s supposed to follow inflation. In the upcoming years we can expect to see a $500 increase per year. Individual filers had the possibility to pay into their retirement account of this sort as long as they earned less than $105,000 before taxes, with the grey area stretching all the way to $120,000. These numbers are not changed in 2010, however joint filers, married couples for instance, got a $1,000 bump over $166,000 to $176,000 combined gross monthly income.
It may seem obvious, but the best part of the Roth IRA is that it’s tax free money if your account meets the restrictions. You’ve paid the taxes on the contributions but the earnings become tax free as well if you’re more than 59.5 years old and have had the account for five years. It doesn’t mean much if you use it for its intended purpose, others take notice. You are also entitled to one $10,000 withdrawal in a lifetime to help you out with rebuilding or purchasing your first house.
Roth IRA rules are quite easy to understand once you’re in the mind state of the legislators. It’s intended to be a significant tax help over traditional IRAs in case you were following some simple guidelines. It’s only natural that the government watches everything that mentions tax-free with both eyes open.
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