Roth Ira Investment | Roth Ira Eligibility | Roth Ira Accounts

Use Your Roth IRA To Pay For Your Child’s Education

Do you constantly worry how you will pay for your children’s education?   If you have a Roth IRA, your worries are over.

Using your Roth IRA to pay for college expenses helps provide you and your family with financial aid.  Not all parents who have a Roth IRA recognize this specific feature of their retirement accounts.  Study the key features of your Roth IRA to help you understand the procedures, rules and guidelines.

One of the most significant features of a Roth IRA pertains to college financing.  You can get distributions at any time, if you need the money for educational expenses.  If you use your Roth IRA for college expenses, you are authorized to make distributions on the principal value of the account.  There is some good news.  You will not incur any federal taxes or penalties from the IRS (Internal Revenue Service).  The interest your contributions gained can be maintained and secured in your Roth IRA account until you retire.

Normally, early withdrawals and distributions in an IRA will obtain taxes, but not if you are using your contributed money for college expenses for your child.  A specific stipulation of a Roth IRA gives you the privilege of avoiding the 10% penalty for early withdrawals.

With a Roth IRA, you are not only saving for your retirement, you are also helping to establish a better life for your children, by being able to pay for them to get a higher education.

Ways To Avoid Penalties On Your Roth IRA

Here are some things you need to know if you plan on withdrawing money from your Roth IRA.  You may incur early withdrawal fees on your Roth IRA.  There are some ways you can avoid these penalties.

• If the Roth IRA account holder becomes permanently disabled, you can withdraw the funds without penalty.
• If the event of the account holders death, his or her estate will not have to worry about penalties for early withdrawal.
• If the Roth IRA account holder is seriously injured or ill, and prolonged medical care is needed, the early withdrawal penalty is waived.  The medical expenses have to be more than 7.5% of the account holders annual gross income.
• If you are purchasing your first home, you can withdraw $10,000 from your Roth IRA without penalty.  Remember this is a lifetime limit.
• If you have any urgent educational costs for you, your spouse, children or grandchildren, you can safely withdraw from your IRA.  You will still be required to pay taxes on these withdrawals.
• If the IRS has placed a levy on your wages to pay back taxes, you can use your IRA to withdraw money and settle your tax debt.
• If you have been unemployed for more than 12 weeks and you need money to pay your medical insurance premium, you can use your IRA to help make the payments.

These withdrawal exceptions are very specific, and can only be used in case of emergencies.  It is good to have a Roth IRA in case the unexpected happens.  The money is meant for retirement, but we can not predict when an emergency may hit.

Traditional IRA Vs. A Roth IRA

Which IRA is better?  A Traditional IRA or a Roth IRA?

A Traditional IRA is a tax deferred retirement plan.  Contributions made to a Traditional IRA may be tax deductible depending on income, tax filing status, and some other factors.  Contributions made to a Traditional IRA are made on a pre tax basis, which means the money is invested before it is taxed.

Investing pre tax money is that it has the potential to lower your current tax bracket, and your money will grow tax free until you withdraw it.  Withdrawals that are qualified will be treated as ordinary income and may be subject to income tax.

Anyone can contribute to a Traditional IRA, but not everyone will get the benefit of a tax deduction.  Traditional IRA holders are eligible to withdraw from their IRA at the age of 59 ½, at this point the withdrawals are taxed as ordinary income.  You may incur penalties for early withdrawals.

A Roth IRA is a tax exempt retirement plan.  Contributions made to Roth IRA’S are not tax deductible when they are made.  Qualified distributions made during retirement years are tax free.

With Roth IRA’S a person that files their taxes as single can not earn more than $95,000.  If you are married, you are limited to annual maximum income level of $150,000.

The minimum withdrawal age is 59 ½.  When the money is withdrawn, none of the money is taxed.  The principal can be withdrawn at any time without penalty.  The earnings must remain in the Roth IRA or they will be subject to taxes and penalties if you make early withdrawals.

It is a good idea to investigate which type of IRA will be best for you, a Traditional IRA or a Roth IRA.

Getting Advice On Your Roth IRA

If you are thinking about opening a Roth IRA, you may want to consider hiring a financial advisor to help you out.

Hiring a financial advisor will give you expert advice and valuable resources in the best way for you to save for your future.

Financial experts can help you:

• Save time, avoid costly mistakes, manage risks, and help you improve your overall investment results.
• Guide you through all of your options:  IRA, Roth IRA, 401K, pensions, annuities, etc.  They can help get you on the right track to have the kind of retirement you have always dreamed about.
• Decrease your estate tax liability.  This will help give your loved ones financial stability.
• Reach your educational savings goals.
• Help you determine the type of insurance you need to protect yourself, your family, as well as your assets.
• They can help you minimize your taxes, file tax returns, and plan future action to reduce tax impact.
• If you own your own business, they can help you develop strategies to manage your finances, cash management, employee benefits, and corporate taxes.

You can take care of your own financial planning, but most of us are not experts on these matters.  To get the best advice, you need the help of a financial expert.  They are experienced in all types of investments, and their job is to help you get the most from your money.

Having a financial expert help you with your Roth IRA is a great way to make sure you get the support, guidance and reassurance to help you stay on course and reach your long term savings goals.

What Roth IRA Is Best For You?

Knowing the best Roth IRA requires doing research that will affect the performance of your assets.  To have a profitable Roth retirement plan, you need to be aware of all the investments available.  Look at non-conventional investments and their earnings potential.

To get the best results from your Roth IRA, keep in mind that the success of your retirement investing depends on what industries are doing well at the time you invest in that particular business.  As an investor you should look at the big picture and only invest your funds in investments that will continue to perform well over a long period of time.

Real estate is a popular choice for many retirees as one of the best Roth IRA assets.  Real estate offers promising rates of return on your investment.  Although real estate success rates are high, there are Roth IRA limitations and restrictions on real estate dealings.  You should do careful research, like the indirect benefits, consequences of self dealing, and the type of transactions that are prohibited.

If you are interested in investing in conventional, yet safe assets, think about bonds and CD’S.  CD’S and bonds are covered by the Federal Government.  That is why the returns are pretty low.

The best Roth IRA investments can help you have enough money for retirement.  Make yourself familiar with the maximum value or profit that your account can produce over a specific period of time.  Another good thing about a Roth IRA retirement plan is, since your original contributions are already taxable, upon retirement you can make withdrawals and disbursements tax free.