Like the Traditional IRA, Roth IRAs are flexible, and they are a popular way for individuals to save for their retirement. Roth IRAs differ, however, because assets can grow on a tax-free basis.
- Any individual who pays income tax may establish and fund a Roth IRA.
- Rental income, interest and dividends and other amounts generally excluded from employer-paid income are not eligible as compensation for contributing to a Roth IRA.
- A Roth IRA can be funded from your own contributions, spousal contributions, transfers and rollovers.
- A Roth IRA must be established with an institution – such as a bank, brokerage or other financial institution – that has received IRS approval to offer IRAs.
- All IRA contributions must be made in cash. Regular contributions cannot be made in the form of securities.
- IRAs cannot invest in collectibles but can invest in U.S. gold coins, silver coins and certain other precious metals.
- Qualified distributions from Roth IRAs are tax and penalty free, but non-qualified distributions may be subjected to tax and early-distribution penalty.
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