Introduction to Roth IRA Accounts Roth 401k/403b plans What is a Roth IRA? Privacy Policy Copyright 2008 - 2011 - RothAccounts.com Traditional retirement accounts have always touted the benefits of saving for your retirement. The promise of tax-deferred savings makes your savings grow quickly. However, there’s a trade-off. The assumption of traditional accounts is that you will pay less on taxes when you’re retired than you will now when working. And unfortunately, when that bite comes, it may be bigger than you assumed. The beauty of using a Roth retirement account is that it avoids paying taxes altogether on both contributions and earnings. This is because those same taxes are already paid on the money you deposit. As a result, keeping within the limitations of the account use, and no new taxes will ever be owed. In essence the Roth is technically a tax shelter for retirement savings, but it’s not illegal like a bank account in some Caribbean bank offshore. Roth accounts in general were first created in 1998 with the Roth Individual Retirement Account (IRA). The name was in honor of a Delaware senator who pushed the authorizing legislation through Congress. Today just about anyone can open a Roth account IRA and even greater benefits have become recently available: • When converting a traditional retirement account to a Roth required minimum distributions are excluded from the formula to determine allowable income limits (account holders are currently capped on how much adjusted gross income they can make and deposit to a Roth IRA). • Inflation is not a factor in income limits. Roth IRA laws provide for inflation indexing to those limits. • Beginning in 2008 if you have a distribution from one of your traditional retirement accounts in your employer plan you don’t first have to put it in a traditional IRA. Instead it can go straight into a Roth IRA without penalty (translation – there is no tax bite for the transfer. This is a huge benefit). • By 2010, there will no longer be an adjusted gross income limit before you can deposit via a Roth conversion (you don’t have to wait until you’re making less money to be eligible). 2006 brought the biggest shift in retirement account laws when Congress created the Roth accounts in 401k and 403b plans. This new option is very similar in function to the Roth IRA, but the big difference is that you can use it in conjunction with your employer retirement plan. That allows you to keep matching contributions from your employer. And you don’t have to wait until employment separation to get into a Roth account. Overall, both types of Roth accounts make it easier to build, preserve and use your retirement savings and we’ll go over each in some detail in the following pages.  Next - Roth 401k/403b