Best IRA Fund

If you ask those in the know what the best IRA fund is, most likely they will tell you to open a Roth IRA. Let’s take a look at three different IRAs so that you can decide which is best for you.

As stated at the top, a Roth IRA is considered the best. Why? For several reasons including the fact that once you reach the age of 59½, you are not taxed for any withdrawals. Other more traditional IRAs do not afford you this benefit.

In addition, the Roth IRA allows you to contribute up to a maximum of $5000. In addition, however, if you are 50 years or older, you can add $1000 to your contribution to "catch up" at the end of the year. Moreover, let’s assume you need money for illness or other emergencies; you can withdraw money from your Roth IRA without penalty as long as you have reached the magic number of 59½ as long as the funds have been in your account for five years.

What other types of IRAs are there? Besides the Roth IRA, there are the tax-deductible and non-deductible IRA accounts. The tax-deductible IRA account requires an income cap for singles at $63,000, while married couples have a cap of $105,000. In this plan, withdrawals are taxed although you can withdraw funds without a penalty before the required age if you intend to purchase a home, fund your child’s college education, or become ill. The maximum amount you can withdraw is $10,000.

For the non-deductible IRA account, anyone who earns an income is eligible. You are also taxed for withdrawals and the amount you can withdraw from your account is the same as the tax-deductible account. As with all three accounts, you are allowed a maximum of $5000 in contributions as well as an additional $1000 at the end of the year provided you are 50 years of age or older.

The Roth IRA account does not tax or penalize you for withdrawals as long as the account is maintained over a five year period and you are 59½. In addition, if you need money for illness, buying a home, you are also allowed a maximum withdrawal of $10,000. The only difference is that if you withdraw funds for college tuition, taxes must be paid on the amount drawn.

In order to determine the best IRA fund for you, it would be prudent to consult with a financial advisor or your accountant who can decipher all of the rules and regulations pertaining to all three types of IRA accounts.

One thing is certain; if you are in your early 30s or 40s, now is the best time to begin saving for your retirement. As your income increases, you can add more funds to your account. Having an IRA account as well as choosing the best IRA fund that will offer you the best rate of return should be a top priority.