When Do You Pay Taxes On A Roth IRA ?
If you want to open a Roth IRA, you may be wondering when do you pay taxes on it. When it comes to paying taxes and Roth IRA, you need to understand that you first pay income tax on your earnings and only then contribute to a Roth IRA. This means that all taxes are paid prior to the contribution and hence, you do not pay any taxes when you withdraw from your Roth IRA. |
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The other advantage of a Roth IRA is that the earnings are also tax-free. So, when you get a qualified distribution on reaching 59.5 years, you pay no taxes.
The Roth IRA has become the preferred vehicle for retirement saving because it offers a lot of flexibility. Since you have already paid taxes on the money before making a contribution, you can withdraw the contributed amount at any time. The only funds you cannot withdraw are earnings, which can be withdrawn when the accountholder reaches the age of 59.5 years.
A Roth IRA can be extremely advantageous for people who fall under the high income tax bracket as it will allow them to save a lot of money on taxes.
A Roth IRA can be opened very easily through a qualified broker. In 2009, the maximum contribution allowed is $5,000 annually. Since the contribution is with after tax dollars, you cannot deduct it from your tax returns.
The Roth IRA can hold stocks, gold, mutual funds, bonds, securities or any other IRS approved investments. This is the perfect retirement vehicle for people who are looking to build a nest egg for their retirement.
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