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Definition of 'Roth IRA'
An individual retirement plan that bears many similarities to the traditional IRA, but contributions are not tax deductible and qualified distributions are tax free. Similar to other retirement plan accounts, non-qualified distributions from a Roth IRA may be subject to a penalty upon withdrawal.
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Investopedia explains 'Roth IRA'
A qualified distribution is one that is taken at least five years after the taxpayer establishes his or her first Roth IRA and when he or she is age 59.5, disabled, using the withdrawal to purchase a first home (limit $10,000), or deceased (in which case the beneficiary collects). Since qualified distributions from a Roth IRA are always tax free, some argue that a Roth IRA may be more advantageous than a Traditional IRA.
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Video Definition
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Be sure to consider the tax benefits and the eligibility requirements of the Roth IRA.
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This comprehensive guide goes through what a Roth IRA is and how to set one up, contribute to it and withdraw from it.
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To answer this question, you need to consider several of the factors we outline here.
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