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How You Own Assets Impacts Taxes: ROTHs

The ROTH versions of these accounts :

  • Have you paying income tax on the dollars you contribute.
  • As long as you take the money out for a qualified reason (namely the initial ROTH account has been open for 5 years and you are age 59½)… YOU NEVER PAY TAXES AGAIN!
  • Unless you meet an exception, for most accounts you will pay a 10% penalty on earnings withdrawn should you take money prior to turning age 59½.

NOTE:  For ROTH IRAs, the first dollars withdrawn are those contributed.  You can take those at anytime with no negative tax consequences.  It is when you touch growth that Ordinary Income taxes and penalties come into play.

<NEXT:  How ownership of financial assets impacts taxes:  Non-Deductible>

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