The Facts About Educational and Roth IRA’s Essays

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The Facts About Educational and Roth IRA’s In 1997 great things came into play for the taxpayers. The Tax Reform Act of 1997, which was inacted by the IRS, allowed single taxpayers and married taxpayers a considerable amount of tax relief for the Educational and Roth IRA’s. Individual Retirement Accounts, also known as IRA’s, are accounts opened in an individual’s name only and provide tax-deferred savings for retirement. The contributions may be fully deductible, partially deductible, or nondeductible. All IRA’s have the same basic characteristics that enable customers to save money while gaining benefits that may include tax-deferred savings and tax deductions. An IRA is a product in which customers place additional products…show more content…
Also with the Traditional IRA there are certain taxes which become due after a certain age. After age 59 1/2 income tax is due on earnings and the original contributions are withdrawn tax-free (smartmoney, the ira super page, 2000). In 1998 an additional way for individuals to save for retirement was introduced to the public as a Roth IRA. These Roth IRA’s are a terrific tax break, especially for individuals previously shut out of the deductible IRA game because their incomes were too high. Here’s why. Unlike traditional IRA’s, Roth contributions are nondeductible. But the earnings build up tax-free (SmartMoney, you wanted to know, 2000). Another great point about the Roth IRA is the fact that any withdrawals are free of federal income tax under certain circumstances. To be free from federal tax the Roth IRA must have been open at least five years and your age must be 59 1/2 or older. To be eligible for a Roth IRA you must have an adjusted gross income (AGI) between $95,000 and $110,000 for single filers and between $150,000 and $160,000 for joint filers. Also with the IRA you are not able to contribute more than $2,000 annually per person. With the Roth IRA there are no taxes due if funds are held in the account for at least five years and you are at least age 59 1/2. Original contributions can be withdrawn

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