Free Ebook.


« Salaries of Average Professional Athletes | Main | Interview with Dan Reingold, Author of Confessions of a Wall Street Analyst, Part 2 »

September 12, 2006

Comments

Feed You can follow this conversation by subscribing to the comment feed for this post.

It's probably time for a similar discussion about the Roth 401K, which just got Congressional approval to go past 2010. Roth 401Ks are very cool...

Other advantages to a Roth IRA:

If you could afford to contribute more to a traditional IRA, then contributing to a Roth IRA effectively allows you to do that.

Withdrawals from a Roth IRA do not cause Social Security benefits to be taxed, as do withdrawals from tax-deferred savings such as traditional IRAs or 401(k) accounts. Once past the exclusion amount, another $1 of income can result in the taxation of $.50 or $.85 of Social Security benefits which effectively increases your marginal tax rate. For example, you could defer taxes while in the 25% bracket, realize that money as income in the 15% bracket but if $.85 of Social Security benefits are taxed you're effectively at the 27.75% bracket. Since the exclusion amounts are not indexed for inflation, more and more people will be hit by this as time goes on.

If I'm correct, he would only be able to take out $5,000 tax-free as he has to wait 5 years before taking any of his principle out without penalty. This is what I recall finding before I opened our Roth's.

Thanks,
Jeff

Jeff, I'm obviously talking about withdrawals during retirment. You have to be 62 to draw Social Security retirement benefits, which is greater than the age of 59 1/2 to escape penalties on IRA withdrawals.

Please check online resources about IRA withdrawals. Don't know how to find them? Try www.google.com.

The comments to this entry are closed.

Enter your email address:

Delivered by FeedBurner

Disclaimer


  • Any information shared on Free Money Finance does not constitute financial advice. The Website is intended to provide general information only and does not attempt to give you advice that relates to your specific circumstances. You are advised to discuss your specific requirements with an independent financial adviser. Per FTC guidelines, this website may be compensated by companies mentioned through advertising, affiliate programs or otherwise. All posts are © 2005-2012, Free Money Finance.

Stats