How to Calculate Interest Earned on Roth IRA
One of the main features of a Roth Individual Retirement Account (IRA) is tax-free growth of your investments. As long as you follow the Internal Revenue Service (IRS) rules, any money earned in your account, be it interest or dividend payments or growth of capital, is permitted to grow and to be withdrawn tax-free (although you must pay taxes on the money put into your Roth initially). Roth IRAs are very different from taxable investment accounts in many ways, but the steps for calculating interest earned on the account are the same.
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Look at your account statement. One of the main benefits of the increase in financial news coverage is the education of the investing public, and their subsequent requirements to hold their financial providers to higher standards. As a result, account statements have become increasingly detail-oriented and comprehensive, and most information about your account can be found in them quite readily. These days, most firms put important information such as account value, account growth, and interest payments right on the first page of their statements; oftentimes, year-end statements possess even greater detail, giving complete transaction and earning data for an entire year. Your first stop in looking for the interest earned on your Roth is your account statement.
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Call your adviser. Even if you work with an online brokerage, representatives at the firm should have access to your account, and should be able to perform basic calculations for you. If you can't find the interest figures on your account statement, ask your adviser to do the leg work for you and calculate your interest-earned figure. Some firms may be more likely than others to do this extra step for you, but if you are happy with the level of service your firm provides in other areas, they will most likely perform this service for you as well.
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Do your own math. Depending on the complexity of the contents of your investment portfolio, the calculation of the interest you earned on your Roth IRA can be easy or somewhat challenging. If all you own is a single bond, then you won't even have to look at a statement--simply multiply the face value of the bond by the interest rate, and you will get the dollar figure of interest you earned for the year. Similarly, if you have just a few securities, you can look up their annual interest payments online or in the financial press--multiply their annual payout by the number of shares you own, and you have your interest figure. If you own hundreds of investments of various types, you may want to enlist the assistance of a tax adviser to help you with your computation.
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