Do you have a Roth IRA, yet?

If not, today I’m going to try to convince you to both open up a Roth IRA and to start contributing to it!

But before I start my discussion, do you meet the following basic requirements?

1. Did you have earned income this year?
2. If you are single was your income less than $107,000? or if you are married (and filing jointly, is your income less than $169,000)?  I’m ignoring the income limitations a bit and keeping it simple.  check the irs.gov site for more details if you are interested.
3. I’m assuming that you work in the US and are an US citizen, if you are not, then the Roth IRA probably doesn’t apply to you (sorry)

Okay, on with the discussion!  The following are concerns from people who I have talked to during various points in time over the past few years.  Just to make this article flow more smoothly, I’m to orchestrate the following in a two person dialogue style, for simplicity.  So it will be me (MR) and my composite friend that I will call V.

MR.:  Why don’t you have a Roth IRA?
V….:   I don’t want to tie up my money in an account that I can’t tap into until I retire.  I might need that money.
MR.:   Actually V, the money you contribute can be taken out at any time without a tax penalty or other government fees.

V….:   What about the waiting 5 years and some type of complex distributions system or waiting until I am 59 1/2 rules?  Why 59 and 1/2 and not 60?
MR.:   I have no idea why 59 1/2, sorry very strange choice in my opinion, but what the rules identify for the 59 1/2 and 5 years and some type of complete distribution system, is on the earnings!  The “earnings” is the amount that your investments equals above the total amount that you deposited into the account (the deposits are called contributions in IRS lingo).

V….:   So you mean to tell me that I can deposit (contribute) the entire $5,000 limit for the year, then a month later pull the entire $5,000 out, let’s say for some type of emergency, and I’m not breaking any rules?
MR.:   Yep and let’s say that you contributed $4,000 for the last three-year for a grant total of $12,000 worth of contributions.  You can take that entire $12,000 without any type of government problems.  Sweat deal if you think about it, and it’s one of the reasons that I use my Roth IRA for a 2nd level Roth IRA emergency fund.  I’ll probably never need it, but it’s nice to know that it’s there.

Do you have a Roth IRA, and are you putting money into this great investment vehicle?

Cheers,

MR