If you are looking for a way to save towards your retirement then you should consider getting a Roth IRA (Individual Retirement Account) or get a 401K that both large and small businesses offer their employees. After setting up you have the right to start making contributions towards it. But when making IRA contributions you need to be aware of certain things and below we take a look at what these are in relation to a Roth IRA.
First of all, throughout any financial year the amount you contribute to your Roth IRA is limited. Today an individual under the age of 50 can only contribute $4,000. If you are over 50 it is $4,500 or 100% of what your earned income is. Which one it is depends on which is the lesser amount. Also to contribute to IRA's there is no limit on the person's age.
However in order to make Roth IRA contributions your income should be taxable and if an individual is contributing to such an IRA their gross income should not exceed $110,000. For a couples, who file joint returns in any given year, the combined gross income limit is $160,000. However, if a couple chooses to file their returns separately, the gross income limit is $100,000.
You need to be aware that your Roth IRA contributions will be reduced when you are actually contributing towards a traditional IRA as well. So if you are making contributions to both a Roth and Traditional IRA these should not exceed the total amount of contributions you are allowed to make in any given year. But with Roth IRA's the contributions you make on these will be reduced if your income goes above a certain limit.
However you can use the conversion method to allow you to contribute towards a Roth IRA when you have a traditional one. All you have to do is take out some of the funds from your traditional IRA and then transfer these funds within 60 days into the Roth IRA. Although when you make Roth IRA contributions you are taxed on them. Any withdrawals made or funds distributed are not taxable.
When it comes to making your contributions to your Roth IRA you can do so at any time of year. However, you must make sure you do so before the due date for your tax return in a year not including any extensions offered. As they are not tax deductible then the Roth IRA contributions should not be reported on your tax returns.
As you can see from doing a little investigation just how important Roth IRA's can be to making your retirement a financially stable one. So when planning your retirement you need to consider just how important getting an IRA is to it.
Above we have given some details relating to making IRA contributions. It is also a good idea to discuss the issue with your financial adviser or accountant as they may be able to recommend an IRA that they feel a suitable investment for you. Which should then help to make sure that your retirement is a much happier one in the future.
