Friday, 18 October 2019

4 Things Beginners Need To Know Before Opening a Roth IRA

Roth IRA

Today we are going to talk about 4 things that you need to know before you open a Roth IRA. If you are thinking about it then stick with me. The first thing that I want to say before opening a Roth IRA is,

1. Know The Rule

We get this mixed up a little bit here, and all over the internet, there is all kind of misconceptions about how this Roth IRA works.

Read: What Is a Roth IRA Account and How Does It Work?

If you want to take out completely tax and penalty-free money from your Roth IRA. Then you must have that account for 5 years and be over the age of 59 ½,. For completely free and total withdraw of the money no matter which portions it is.

In a Roth IRA, when you open it and you contribute money, you are free to take that money back out, if you put $1,000, in 2 years from now, you get in a car accident something happens and you just have no other source of money, in order to take all the money out including the gains, then you have to meet what I just said. 5 years and be over the age of 59 ½

2. Make It Worth It

If you want to open a Roth IRA, make it worth it. Don't just open it and let it sit there, open it and put something in, find the money somewhere else to pay your bills and other stuff, don't touch it, max it out.

3. Sooner The Better - Take Advantage of it When You Are Young

If you can't max it out then make sure you do as much as possible when you are young, when you are young you don't have that high paying job yet, you are in a lower tax bracket, remember in a Roth IRA the money that goes into it has already been taxed, wherever you got the money from at your job

If you are at a job that doesn't quite pay you as much as you hope, then you are in the lower tax bracket which means the money contributed is growing because it wasn't taxed as much and it's never going to be taxed again.

If you wait to start contributing more when you are in your 30s, 40s, now you got a family, a house, you got bills, for some reason you keep putting money into it, then that money is not to have as much time to grow. But you are in a higher tax bracket at the point. So, you are not able to contribute as much. It gets harder the older you get.

4. Make Sure You Choose Your Investment Wisely

I am not say pick the wining stocks, I am saying however old you are, make sure you are taking enough risk. Most people are not taking the risk that is in line with what they want. If you are on a certain age and a certain income and you able to take risks early on, in your life, do it.

Who cares if the market falls, what are you going to do, you are not going to do anything with it, you are going to invest more, you want the markest to be going higher when you retire, or you want the market to drop while you are younger, think about it.

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