Roth IRA Programs
A Roth individual retirement account is typically set up by individuals for retirement-investment purposes. Once the contributions go into the account, there are very few instances in which funds can be removed before retirement without financial penalties. While a Roth IRA has similarities to a traditional IRA, it is a different type of account with individual rules.
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Declaring Roth
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Your desire to set your IRA up as a Roth IRA must be noted at the time the account is started. Reasons for choosing a Roth IRA over a traditional IRA include the fact that there is no mandated distribution age. A Roth IRA can exist forever. In addition, it can be passed to the future generations, while providing tax-free income for the new account owners.
Contributions
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You choose how much you wish to contribute each year with the following caps: if you are older than 50, you can contribute up to $6,000 a year, at the time of publication; and if you are under 50, you can contribute up to $5,000 a year. If your earnings for the years in question were less than $6,000 and $5,000 respectively, however, you are only allowed to contribute up to the amount of money you earned as adjusted gross income -- meaning, after all deductions are taken.
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Withdrawals
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Withdrawals from Roth IRAs are allowed at any time without penalty as long as you only withdraw money from your contributions. If you withdraw earned-interest income from those contributions before you are 59 1.2 years old, there will be a penalty of 10 percent.
Loans
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Anyone can be named your beneficiary on a Roth IRA. While you can take a loan from a traditional IRA, it is not the case with a Roth IRA. Loans against this account are not available under any circumstances.
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References
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