Recently, I just finished editing an article for the upcoming May issue of brass|MAGAZINE about saving. I've been doing a lot of research on different ways to save money and everyone seems to agree that when it comes to saving, "the earlier, the better." A lot of experts say that for young adults like me (I'm 23, just graduated from college, and my job as the Editorial Assistant here at brass is my first job in the "real world"), a Roth IRA (Individual Retirement Account) is one of the easiest ways to multiply my money for the future. So I looked into it and here's what I found:
- You can contribute to a Roth IRA if you make less than $110,000 if you're single or $160,000 if you're married filing jointly (I fall into the first category).
- If you make less than $95,000 (me again), you can contribute up to $4,000 a year.
- The contributions come out of your paycheck after taxes, which means that you're paying taxes on that money now. But it also means that if you follow the rules, you don't pay taxes on the money when you take it out in a few decades.
(Those numbers are all applicable for the 2006 tax return and may change in the coming years.)
Another perk? While you generally only get to take distributions (that's when you take money out of your IRA) without penalties after you turn 59½, there are some really cool exceptions. Qualified first-time home buyers can take some money out to cover a few expenses, penalty free. Plus, your Roth IRA savings may be able to help if medical bills start piling up and you are unemployed, if you are disabled, or even if you need help paying tuition. So, even though a Roth IRA is primarily used to save for retirement, it could also help you out if you need it before your hair starts graying.
Personally, I'm excited to see my money grow. I like the idea of having a million-plus to my name when I retire. I would really like to retire somewhere sunny...like the Bahamas.
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