Roth Ira 101

This is a Roth 101 basic class.

ROTH is an IRA, and just like the IRA stands for individual retirement agreement. However it’s associated with Roth, Roth was a congressman who came up with it. It’s a personal savings account very similar to the IRA.

It’s designed to provide us with supplements to what are social benefits would be upon retirement, help us, and help ourselves with respect to savings. The Roth itself is the rapper that provides us with the qualification of the money.

Qualification of the money means that it has some sort of tax benefit to it. Inside the Roth, all their income or all the money that you put into the Roth does not have a tax deduction to it, but the interest or income it earns has a tax deferral to it.


John, this is Rob Lamberts

Why would you put money into a Roth? The reason you would put money into Roth- at some put in the time, all the income is generated will be tool will be tax-free to you, that’s huge having some sort of tax-free income down the road. You sacrifice tax deduction now to have the tax benefits later. It’s similar to the IRA. Their investment tools that you can use inside the Roth are banks and CDs. You got mutual fund companies from financial institutions like brokerage houses, you can have any tools that they have our products if they have funded the Roth get the income in the interest. Real Estate has been very popular in recent years and currently, gold is being sold as part of an asset that should be inside of a Roth.

In 2011, you can put it in if you’re 50 and under of the five thousand dollars into a Roth in addition to your IRA, and if you’re 50 and older you can put up to $6,000 in it. Now there are some requirements from an income standpoint. If you have, as you can see on the screen, $177,000 of gross income and you’re married filing jointly, you can still talk tribute to the Roth. If you’re single,$120,000 and the same working or not working spells rules apply meaning, that if you have a non-working spouse at home he or she can have the same types of contribution limits listed on the screen, as long as the end comes to meet those guidelines. They have to be 18 years of age in order to begin one and have earn income, we will define what the means in the just a bit.

The 59 and a half rule applies to, so if you’re 59 and a half and you have a Roth want to buy a car, put your kids to school, and you’re are younger than 59 and a half you’re going to get a surprise by taking money out of that account. The tax-free and come down the road comes with some strings now and those strings mean that you’re going to pay a 10 percent penalty, not the tax; but you’re going to pay 10 percent penalty on the money withdrawn from a Roth it’s outside the guidelines.

Buying a car and putting the kids to school, are outside the guidelines. Also, there is an additional rule here, different than the IRA and that’s the five rule. You have to have the Roth in place, five years before you take anything out of it. Any assets that are removed from the Roth inside that window of time are going to also be taxed; just the income of course and the 10 percent penalty for 59 and a half or under. 70 and a half rule does not apply. This in addition to a tax-free income which in itself is huge. You do not have the required minimum distribution rolls associated with Roth as you do with all other qualified kinds of money.


What kind of income is counted- well I mentioned this already, is earned income, earned income is 1099, w-2 income? Typically you get up in the morning to drive to work or something like that.

I did mention real estate, real estate is an asset that can be inside your Roth. It doesn’t have to be earned income earning, it can be the assets. If you have a business- that rental business and that’s your sole source of income, that could be considered your income.

That’s very different from the person that has a house or the rental income from that, that’s going to be considered passive income. Other things that would be considered passive income would be CD interest, 1099 from capital gains are capital gains tax with 1099 for dividend interest that you earn in investment portfolios. So that kinda wraps up the basics on the Roth.

I thank you for watching and this is Robert Lamberts


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