If you’ve been thinking about your financial future and how to make it more secure, you should consider investing in a Roth IRA. An IRA is an Individual Retirement Account and a great choice for solidifying a person’s financial future. Investing in one is not as difficult as you might think. However, there are some steps to consider before getting started and we have them listed here.
Get an early start – remember that compounding interest over the long-term is a powerful financial ally. For example, if you wait 5 years to get started, it would mean that your nest egg could be up to 25% smaller.
Open a 401(k) account first – if your employer matches your contributions in that 401(k) plan, you should do this before opening your Roth IRA account.
You can still contribute for last year – usually, you can contribute to an IRA account up until you file your taxes. In other words, you have until April 15th each year to contribute for the prior year.
It’s never too soon to start – Roth IRA accounts have no minimum age requirements. However, you do have to be earning taxable income. So even if you’re a minor, you can still open an account.
You aren’t too old either – even if you’re no longer in your 20’s or 30’s, it’s never too late to open your account. Interestingly enough, even if you are over the age of 50, you are allowed to make what is called “catch up” contributions each year of up to $1,000 over the allowable limit.
Your money will not be trapped forever – contrary to many beliefs, you have access to your money whenever you want it, even though you may still be contributing to your Roth IRA account. Additionally, since your money has already been taxed, in many situations, you won’t incur any early withdrawal penalties.
Do some shopping first before making your decision – either your local bank or another financial institution probably offers these types of retirement accounts. However, no two are alike and you need to do some comparison shopping in order to find the one that best suits your financial needs.
Make this a financial priority – a Roth IRA account is one of the best retirement savings plans you can invest in. If you need to think about either funding your child’s education or starting to save towards retirement, we recommend you give retirement the utmost consideration as there are numerous options for financing an education.
Convert your regular IRA to a Roth IRA – despite the fact that this type of IRA came into being long after the traditional type, the Roth type has more advantages, especially if you are older. These IRA’s grow tax-free throughout the lifetime of the account.
Diversify your investments – as the old cliché goes, “never put all your eggs into one basket.” Most financial planners will tell you to diversify your investments. You should open a Roth IRA account to supplement whatever retirement plans you may already be contributing to.