We are now well into the new year, but it is never too late to get your finances off to the right start. Budgeting should have been and still should be your number one goal for the year. If you haven’t started a budget, you should. If you have started a budget, then great, keep it up! At budgetandinvest.com we talk also about investing and the right ways to do it. One of the best ways to invest your money is by starting a Roth IRA. This retirement vehicle has many benefits, the main being that your gains and distributions are tax-free when you take your withdrawals. How do I start a Roth IRA? I’m about to show you how.
Step 1: Determine if starting a Roth IRA is right for you. There are a few rules you have to remember when starting. For example, you can only contribute a maximum of $5500 per year unless you are 50 years of age or older, then you can contribute $6500. Also, there are income limits to consider. If you are a single tax filer who makes $300,000 a year, you can’t participate in a Roth IRA. Additionally, the money you contribute must remain until you are 59 1/2 years old, except for a few exceptions. For a full list of rules visit: 2017 Roth IRA.
Step 2: Once you have determined that starting a Roth IRA is right for you, the next step is opening up one online. It is easy to do and requires about ten minutes of your time. I’d recommend opening it up through one of the following sites:
Step 3: After you have opened your Roth IRA, it is important for you to contribute additional money to it on an ongoing basis. This allows you to take advantage of Dollar Cost Averaging (DCA). Ideally you would like to max out your Roth IRA contribution every year if you are able to. Also, contributing a set amount on a constant basis will allow you to invest your dollars during stock market highs and lows.
Step 4: Stick to a plan, be patient, and watch it grow. Building a large Roth IRA doesn’t take a stroke of luck or perfect financial acumen, it simply boils down to a few key steps. Open up a Roth IRA, contribute to it on an ongoing basis (the maximum is preferred), allow your dividends to reinvest, and don’t touch your money.
Whether you have a company 401k, a pension or 403b, a Roth IRA is a great complement to any individual’s retirement plan. The tax-free income that it can provide in retirement will allow you to offset many of the taxes you will be forced to pay with ordinary retirement accounts and social security. Don’t hesitate in opening one, the best time to start is now!
Budget Smart, Invest Wise