What Money Can You Invest In Roth Ira

https://lauraloves.net/budgeting-tools/Are you trying to find a simple, straightforward blog post on "roth ira for beginners"? Well, you've come to the right place! This post will cover what a Roth IRA actually is, how to start a roth ira, and how and why to get started on roth ira investing ASAP.

Roth IRA

For so long, I had no idea what a Roth IRA was… Honestly, I was so embarrassed that everyone else seemed to know but me, that I didn't even want to research it. But THANK GOD I did, because now I'm finally investing money towards retirement.

That's basically all a Roth IRA is: It's an investment fund that you put a chunk of your money in every month. It's supposed to grow over time so that you have a nice chunk of change when you're ready to retire.

Retirement is one of those things that seems so far off, but it's never too early to start investing even asmallamount of money towards retirement. This post will answer the essential Roth IRA questions to help you get started.

This post covers the essential things you need to know about investing in a Roth IRA.

What is a Roth IRA?

A Roth IRA (individual retirement fund) is an investment fund specifically for retirement.You can invest up to $6,000 per year in your Roth. When you turn 50, that limit increases to $7,000.

What is the difference between a traditional IRA and a Roth?

Tax breaks!

If you contribute to an IRA, you can get an instant deduction for the money you contribute. However, you cannot receive this deduction for money you contribute to a Roth.

BUT, the best part about a Roth? When you withdraw money from it, the withdrawals are not taxed. Withdrawals from an IRA, however, aretaxed.

With a Roth IRA, you can also withdraw money from it before 59 1/2 and a half for any reason. However, you can't do this with an IRA – you'll be taxed and pay a 10% penalty if you take money out of it before you turn 59 1/2.

What's so good about a Roth IRA?

When you put money into a Roth IRA, the money can grow a lot over many years! Of course, you need to pick decent places to put that money. Personally, I invest in the S&P 500, because it's historically reliable when it comes to growth.

But because you don't have to pay taxes on Roth IRA withdrawals, you won't have to pay tax either on the money your investment makes.

Imagine you put in $10,000 a year for 20 years. Then imagine that you make 8% on your investment each year (8% is the average expected return in the stock market). Youcouldend up with just over $64,000 more than you would (accounting for a 25% tax rate) versus a traditional IRA investment.

Roth IRAs are a great option is you're in a low tax bracket, because you invest post tax money. In other words, yo

Am I eligible for a Roth IRA?

Here's what you need to know about Roth eligibility:

You gotta have "earned income." This could include the following: self-employment, wages, alimony, etc.
You can't earn over a certain amount per year (see number three through five)
If you're single, then the income limit is $125,000 to $135,000. If your income falls in-between these two numbers, you can "partially" contribute.
For all you married folks out there, your join tax return income must fall between $198,000 to $208,000 in order for you to contribute to a Roth
If you're married, but you file your taxes individually, then the income limit is $10,000.
There are no age restrictions for those wanting to contribute to a Roth.
You are allowed to put your money in an IRA and a Roth in the same tax year. However, you just can't exceed the annual limit. For example: You can't put $6,000 in each account; you have to split $6,000, in one way or another, over both accounts.

Remember, if you're married and filing your taxes jointly, be super careful that your joint tax return income doesn't exceed the limit listed under point four 🙂 You don't want to get on the IRS' bad side!

How can I open a Roth IRA?

I personally use Charles Schwab. You can open the Roth yourself online.

It's simple to open and simple to invest money in! There are plenty of YouTube videos available that take you through the process 🙂

This post covered the essential thing you need to know about investing in a Roth IRA.