Question: Wondering about the benefits of a Roth IRA. When do we need to purchase to benefit us for 2011 taxes? Where do we need to go to purchase?
Answer: Thank you for the great question. The Roth IRA was set-up by Delaware's own Bill Roth who served for many years as one of our U.S. Senators. Roth IRA accounts are set-up with after-tax money, so their is no tax deduction in the current year for the contribution to a Roth IRA. Unlike traditional IRA accounts, which are a reduction in income in the current year and will result in current year tax deductions, the Roth account is funded with after tax money. The benefit to the Roth account is that distributions/withdrawals from a Roth account, once the account has been held for a certain period are tax-free. When you take a distribution from a traditional IRA you have to pay tax when you take the money out, but with the Roth, both the principal and the income is tax-free when taken from the account.
You will need to speak to your investment advisor to provide you with more specific information the benefits of a Roth versus traditional IRA account. We can certainly assist you with the basic account fundamentals when you come in for your tax preparation appointment.
For more specific answers to your tax questions, contact Ralph V. Estep, Jr., of Saggio Accounting+PLUS at (302) 659-6560 or visit our web site at www.saggioaccounting.com