How to Choose a Roth IRA

Born on January 1, 1998, the Roth IRA came as a result of the Taxpayer Relief Act of 1997. Its namesake is the late Senator William V. Roth, Jr. The Roth IRA does not allow for tax deduction for contributions; instead, all earnings are tax free when withdrawn by either you or your beneficiary. Additional benefits include avoiding early distribution penalties on certain withdrawals, and ending the need to take minimum distributions after age 70½.

Difficulty: Moderate

Instructions

1. Meet with your financial planner or read and research through books and websites to learn more about Roth IRAs and other forms of investment you might consider instead of a Roth.

2. Understand the benefits of a Roth IRA, including tax-free withdrawals, to determine that a Roth IRA is your best choice.

3. Choose your type of investment. The best investment for your Roth IRA includes consideration of the size of your investment, your time frame for investments, your other current investments and your investment style.

4. Select a provider. Options may include banks, brokerage firms, mutual fund companies, mutual fund companies and insurance companies.

5. Ask up front about potential services fees and other charges when selecting a provider.

6. Work with your selected provider to establish your Roth IRA.

Tips & Warnings

• Many Roth IRA providers offer management of your investments via simple, easy-to-use tools online. If this is an important aspect of your investment, make sure your provider offers this service.