Roth Ira Benefits Roth Ira Tax Benefits Roth Ira 101

This article will review the Roth IRA benefits, as well as the Roth IRA tax benefits and give a basic review of Roth IRA 101 introduction.  The Roth IRA as created by congress with the passage of the 1997 tax payer relief act.

The 2010 Roth IRA contributions limits are the following;  the annual contribution limit to a Roth IRA is $5,000.  However if you are 50 years old or older, you can contribute an additional $1,000. Another Roth IRA benefit includes the ability for older tax payers who are 72 1/2 to still make a contribution from their earned income if they are still working.

The Roth IRA contributions income limits for a single payer tax filer is an modified adjusted gross income (MAGI) amount of between $105,000  to $120,000.  For a married couple filing jointly, their (MAGI) amount is between $167,000 to $177,000.

 The IRS requires that an traditional IRA account begin to take mandatory distributions withdraws beginning at age 72 1/2.  Unlike a traditional IRA, one of the Roth IRA benefits includes the ability of the Roth IRA account owner not having to take a mandatory distribution withdraws.

 A Roth IRA tax benefit also features the following advantages and benefits; You can avoid having to pay a IRS 10% early withdraw penalty for those account owners who are under age 59 1/2 by meeting the following criteria:

 You can utilize the Roth IRA withdraws to pay off IRS tax liens and penalties.

You can withdraw funds from your Roth IRA to pay for the purchase of a first time home.

You can withdraw funds from your Roth IRA to pay for medical insurance premiums.

You can withdraw funds from your Roth IRA to pay for non reimbursed medical expenses.

You can withdraw funds from your Roth IRA to pay for your continuing education degrees.

See IRS article notice 97-60 for additional information about the withdraws from a Roth IRA for educational needs.

Other ways to avoid a 10% penalty is to be classified as permanently  disabled, or death of an Roth IRA account holder.  You need to have your funds in an Roth IRA for a period of 5 years to avoid a 10% penalty.  This 5 year period is classified by the IRS as tax years, not calendar years.

For example if a Roth IRA account owner  rolls over another IRA account into their Roth IRA the 5 year period to avoid the 10% penalty begins with the new rollover.

 The Roth IRA benefits as well as tax benefits are many. The Roth IRA is an excellent tax free withdraw source for income in your retirement needs.  The principle contributions that you make to a Roth IRA can all ways be withdrawn penalty free, subject to the IRS minimal regulations and conditions. 

The Roth IRA can be used also as an long term financial tool to build up an liquid emergency fund in your retirement years.