Last week, we examined the SEP account, which is a simple way to invest for those who are self-employed.��

This week, we will be examining the ROTH IRA account.� We are very excited about this plan, because it will benefit everybody who is eligible, which means 90% of the American public!

What exactly is a ROTH IRA?

When would the ROTH be a good choice for me?
EVERYBODY who makes less than the salary "caps" is eligible!� The "caps" are:

• Single - If you make under $95,000 a year, you are completely eligible for the ROTH.� You are partially eligible if you make between $95,000 and $110,000.� Above $110,000, forget about it!
• Married - If you make under $150,000 a year with your combined income, you are BOTH eligible to contribute.� (It doesn't matter if both work, if only one spouse works, etc....you are both eligible if you meet this requirement!)� You are partially eligible if you make between $150,000 and $160,000 a year.� Above $160,000, this is not an option for you.

The ROTH IRA is a no-brainer for everybody.� If you are not taking advantage of this, then you are cheating yourself!� And, it doesn't matter if you already have a 401K plan at work, a self-employed retirement plan, etc...you are still eligible regardless of almost any other plan that you might have.��

How do I set a ROTH up?
A brokerage service (Charles Schwab, Fidelity, etc.) , a bank, a mutual fund company...or even an insurance company...can set up a ROTH IRA for you.� Remember, most of these retirement plans that we discuss are just like opening up a new checking account or savings account...it's just an account with money in it that is set aside for a certain purpose.�

What is a little known feature about Roth IRAs that could powerfully benefit me?
You can withdraw the money you contributed (not what has been earned in the account) at ANY TIME without incurring taxes or penalties!� Therefore, the ROTH would be an excellent way to pay for college, because you could invest money tax free until your child turns 18, then simply transfer all of your original contributions to him/her at college time without any taxes at all!� The earnings portion would continue to accumulate tax free.� However, even if you needed to withdraw the earnings portion, it still will be taxed, but you will have no tax penalties!��

Also, you can convert your traditional IRA to a ROTH.� Consult your finance professional for more details.

What types of investments can I apply the contribution to?��
Once you put the cash in the account, you can buy mutual funds, stocks, bonds, CDs, etc.� The range of choices is usually limited only by the company that you use to set up the account.� There are even ways to contribute such things as gold, silver, etc.

How much can I put in each year?
Any person who is eligible (see the 2nd paragraph) can contribute up to $2,000 every year to a ROTH IRA account.� Again, it doesn't matter if you are working...or if just your spouse is earning income...both of you may still contribute.�� So, a single person may contribute up to $2,000 per year, while a married couple may contribute up to $4,000 per year!� Now, the only catch is that you can contribute $2,000 maximum per year to either the ROTH IRA or a traditional IRA.� So,� whether you use traditional or ROTH IRAs, your total combined contribution can only be $2,000 per person per year.

I still don't understand the difference between Roth and traditional IRAs?
If you contribute to a ROTH, it is not deductible on your federal tax return.� However, it is never taxed again after that point...at any time.� With a traditional IRA, it is tax-deductible when you contribute, and it does grow tax-deferred...but you will be taxed on earnings when you finally do withdraw it!