How to Find the Best Roth IRA
A Roth IRA is not an investment, but rather a way your investment is taxed. Contributions to a Roth IRA are not tax deductible. Your savings grow tax free, and under certain restrictions, withdrawals are tax free. Roth IRAs are best if you earn less than $116,000 a year.
Other People Are Reading
Instructions
-
-
1
Open an IRA. Even if you don't know where you ultimately want to put your money, open a Roth IRA at your local bank and invest in their money market account. While it won't pay large returns, it allows you to start taking advantage of your money's tax-free growth. Once you decide where you want your money, you can rollover the IRA to new account.
-
2
Search for mutual funds that best match your retirement needs. Mutual funds offer diversification, and are managed by experts. However, the goals of different funds vary, from being industry specific to following stock indexes. Most funds offer a combination of stocks, bonds, money markets and cash.
-
-
3
Request prospectuses and Roth IRA kits for funds you are interested in. Request materials online, or by calling the firm.
-
4
Set up your account. Have a set amount withdrawn from your bank account regularly, so you don't have to think about making contributions. Regular withdrawals also take advantage of dollar-cost averaging. When the price of your you mutual fund goes up, you purchase fewer shares. When the fund is less expensive, you automatically purchase more shares.
-
5
Keep records. Keep track of your contributions, and organize all statements the IRA provider sends you.
-
1
Tips & Warnings
You can invest in any type of security in a Roth IRA. Banks, brokerage houses and mutual funds all offer IRAs. Use your age to determine the percentage of your Roth to invest in safer investments (bonds, money markets and cash). For example, if you are 30, 30 percent of your funds should be in "safer" investments. As the IRA grows, you may want to spread out to include other mutual funds in your IRA. Many companies will let you set up your IRA online. Select a mutual fund company with a wide range of funds. It makes it easier to move money between funds.
Before signing up for any mutual fund, consider the fund's expenses.
Resources
- Photo Credit Courtesy of www.freefoto.com.
