7 Surprising Facts About Roth IRAs
Roth IRAs are a great way to build a nest egg for your retirement. If you’re already contributing to your company’s 401(k), adding a Roth IRA can give you added tax flexibility when you start withdrawing. Since you’ve already paid the taxes on the money you contribute, you can take money out tax-free, and that will help minimize taxes from your 401(k). (See also: Optimize Your IRA and 401(k))
That’s just one of the many benefits — here are seven surprising things you may not know about the Roth IRA.
You Can Take Your Money and Run
Retirement accounts have all kinds of rules and regulations, right? Well, the Roth IRA lets you take your money out whenever you want — with no penalties. Any investment gains are subject to different rules, but the money you put in is yours whenever you want it. So if you’re worried that you might need the money, worry not — unless your investment goes down, of course.
A Roth IRA Can Fund Your First Home
If you want to take out some of those investment earnings, you can do so one time. You’re allowed to take up to $10,000 of your earnings to put towards buying a home IF you’re a first-time homebuyer.
Dividends Aren’t Taxed
Any dividends you’re paid on a stock or security you own in a Roth IRA account aren't taxed. This is a HUGE deal if you own a dividend-paying stock for many years. It can add up to thousands and thousands of dollars that you won’t ever have to pay taxes on. Can’t beat that.
It's Not for Everyone
Not everyone can contribute to a Roth IRA. These rules change annually, but for 2012 if you’re single and make more than $125,000 or married (filing jointly) and make more than $183,000, then you can’t contribute.
You Can Contribute After January 31
You have until tax day (April 15) to contribute towards to the previous year’s limit. For example, you have until April 15 to contribute towards your 2011 limit of $5,000 (or $6,000 if you’re over 50).
Death Isn’t the End
If you or your spouse dies, he/she can combine the two Roth IRAs into one without any penalty.
You Can Pass It On
The money in a Roth IRA can be passed on to an heir without any kind of penalty. It’s a really good way to pass money down to someone else.