Saving is Simple With a Roth IRA

By Denise Herron
SNPJ Marketing Assistant
Originally published in the March 25, 2011, PROSVETA issue

Saving for retirement is necessary for a secure future, but sometimes the many options are just too confusing for the everyday layman. We become overwhelmed with the many different choices offered by the many different institutions, so rather than make a decision, we put it off a little longer. Not good! The longer you put it off, the more catching up you have to do to reach a comfortable retirement.

The Roth IRA provides tax-free growth of your money and, as a result, is one of the simplest and most effective savings vehicles. The Roth IRA is a retirement account that is funded with post­-tax income. You pay taxes on your income this year as you would any year. You invest some of your money into a Roth. Since your taxes were paid before you invested, you’ll never pay income taxes on those funds again. And the really beautiful benefit is that all of your earnings on the principal amount will also grow tax-free.

There are several restrictions to remember concerning withdrawing your money and receiving the full benefit of the tax-free growth. The growth on your Roth account can’t be withdrawn until age 59½ without incurring a 10 percent penalty (plus taxes) from the Federal government. In addition, the account must be open for at least five years before you can withdraw any of the growth (interest), even if you turn 59½ in the interim. To keep it simple, just remember that in order to access the great benefit of tax-free interest, the account must be open for at least five years and you must be over 59½ years old.

Because you took care of your taxes up front, you’ll have fewer restrictions later. For example, you do not need to start withdrawing money from your account at age 70½, a requirement of the Traditional IRA. In addition, as long as you have an earned income, you can continue to contribute to the Roth IRA beyond age 70.

Since money going into a Roth is post-tax money, it’s very simple when it comes to the IRS. There is no need to report a deduction on your 1040 form when you make a contribution, like you would with a Traditional IRA. And likewise, as long as you follow the five-year and over 59½ rule, there’s no need to report a withdrawal from your Roth as taxable income.

Keep it simple and start investing in an SNPJ Roth IRA. If you open an account before April 15, you can still make your maximum contribution for 2013 and contribute for 2014 as well. Contact the SNPJ Sales Department or phone the Home Office at 1-800-843-7675 for complete details


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