| Many people have questions about Roth IRA rules. | | | | $101,000 in a tax year. In a traditional IRA, full |
| We hope to provide at least some of the | | | | contributions are only allowed at income levels |
| answers here, as well as a basic definition of a | | | | below $53,000. |
| Roth IRA and just a little background. | | | | With a traditional IRA, distributions must begin at |
| The Roth IRA was established in 1998 to provide | | | | age 70 ½ or the account holder will be |
| alternatives to the traditional IRA. Most of the | | | | penalized. Roth IRA rules allow account owners to |
| Roth IRA rules were established at that time, but | | | | leave the money in the account for as long as |
| the maximum annual contribution has changed | | | | they like, there are no minimum distributions and |
| over the years from $2000 to $5000 and will | | | | no age restrictions. |
| continue to increase starting in 2009 by $500 per | | | | With a traditional IRA, you can not withdraw |
| year, because of inflation. | | | | funds until you reach the age of 59 ½ |
| The simplest definition of a Roth IRA is this; an | | | | unless you become disabled. With the Roth, you |
| individual retirement account with specific eligibility | | | | can withdraw your initial contribution at any time. |
| and tax status requirements, as dictated by the | | | | The traditional and Roth IRA rules concerning |
| Internal Revenue Service. Individual retirement | | | | investment options are the same. They are |
| accounts and the accompanying tax breaks came | | | | limited to what cannot be purchased with the |
| into being to encourage people to think about and | | | | account, things like art, collectibles and life |
| plan for their own retirement, since most | | | | insurance. Most investors stick with things like |
| companies no longer offer in-house retirement | | | | stocks, bonds and CDs, but real estate, mutual |
| benefits and social security is unlikely to provide a | | | | funds and other types of investments can be |
| secure and comfortable retirement. | | | | purchased with the account, as well. |
| In order to fully understand the definition of a | | | | When it comes to real estate, the rules are that |
| Roth IRA, it is helpful to compare the account to | | | | neither you nor your family members may live in |
| a traditional IRA. The major differences are | | | | a dwelling owned by the account. Under the |
| outlined below. | | | | definition of a Roth IRA, self-dealing is not allowed. |
| When it comes to taxes, the Roth IRA rules | | | | Transactions that benefit you or your family |
| require that income tax be paid on initial | | | | members personally are not allowed. So, you can't |
| contributions, but interest and returns are not | | | | do things like live in a house owned by the |
| taxed. In addition, withdrawals and distributions are | | | | account or use funds to invest in a business |
| not taxed. In a traditional IRA, contributions are | | | | owned by a family member. |
| tax deductible, but distributions or withdrawals are | | | | Not all brokers allow all types of investments |
| taxed like normal income. | | | | within the IRA account. So, the Roth IRA rules |
| When it comes to income levels, Roth IRA rules | | | | that a broker outlines for you may vary. It usually |
| allow individuals to make the maximum yearly | | | | takes some effort to find a broker that offers |
| contribution as long as they make less than | | | | his clients everything allowed by law. |