Opening a Roth IRA Account
With all of the options on the market today, it is hard for the average person to know all of the ins and outs of retirement planning. A person’s financial options include products such as 401k, Roth IRA accounts and traditional IRA accounts. A Roth IRA is similar to a traditional IRA account, with a few differences in how it affects the individual’s tax status and some difference to the income requirements. With this plan the IRA contributions are not tax deductible as they are with the traditional IRA plan. The tax benefit the Roth IRA offers to the consumer is in the form of tax free growth on their IRA account along with tax free distributions. To open a Roth IRA there are a few things the consumer should understand before they start the process.
For a person to be eligible for Roth IRA account they must meet the legal income requirements.
To have access to the Roth IRA program the person must have some form of income such as wages, salary or business gains. Certain kinds of incomes do not fit the Roth IRA guidelines. Next the individual will want to make sure that they do not exceed the income requirements for access to the program. Another factor that can exclude a person from access to Roth IRA account would be if they or their spouse has a retirement account through work. The guidelines do change every year, so make sure to have all of your financial information available when you contact an IRA custodian service.
The next step to open a Roth IRA would be to determine how much money you want to start the account with and how much you can afford to make in yearly IRA contributions. There is no legal minimum amount that has to be held in an IRA account; however most of the service providers do have a minimum account requirement. As for how much an individual’s yearly IRA contributions should be, there is no yearly contribution minimum but there is a yearly maximum. As of the tax year 2013, the yearly maximum for and individual is $5,500 in yearly contributions to an IRA Roth. For a married couple the yearly maximum is $11,000 in yearly IRA contributions. These maximum levels placed on IRA contributions can vary depending on factors such as age, income level and whether the individual or their spouse is already enrolled in another retirement plan.
After you have determined that you are eligible and made the decisions regarding how to finance the Roth IRA account, you will want to look into finding an account custodian. Typically IRA account custodians are institutions such as banks or brokerage firms. With a wide variety of service providers, it advised to do a little research on a few IRA account custodians to help you choose one that provides a service that fits your retirement saving needs. Make sure to ask questions about details such as fees, the investment products they offer, requirements on the account balance, account statements and if they have online services.
Once you have decided on a service provider it is time to open the Roth IRA account. The service provider will be well versed in the necessary paperwork needed to open the IRA account and should be able to help you through he process. In the process of opening the Roth IRA account the individual and their service provider will need to work out an investment strategy. Part of the investment strategy is choosing the kinds of financial products the money should be invested in. Typical IRA investment products include bonds, certificates of deposit, mutual funds, gold IRA products and money market accounts. In planning an investment strategy the financial planner will help you develop a risk profile. The risk profile will help you and your IRA custodian to determine which investments are best for your retirement planning.
Setting up an IRA account is a great way to plan for the financial aspect of a person’s retirement. Making financial considerations for your retirement years is a sound decision that will ensure your financial security in your later years. Whether a traditional IRA or a Roth IRA is the right decision for you is largely dependant on your own personal situation. To open an IRA account, compare your finances to the requirements and decide which plan fits your finances better. With the help of a good IRA custodian, saving for retirement can be one of the best decisions you ever make.
