Where to Invest in a Roth IRA When You’re Not Sure

What if I told you that setting up a Roth IRA is one of the simplest and most positive steps you can take to ensure your financial future? If you’re already aware of this fact but aren’t sure where to invest in an Roth IRA, by the time you finish reading this you will know everything you need to take action.

It has never been easier or more financially advantageous to set up a retirement savings account. The government has made it possible for you to save, build wealth, and control the way you want to pay taxes on the account. Income requirements and a preference for before or after tax contributions will determine whether a traditional or Roth IRA will best suited to your financial goals.

If you want to know where to invest in a Roth IRA all you have to do is locate a financial institution like a bank or a federally insured credit union. A life insurance company, mutual fund or stockbroker can also assist you with setting up either type of retirement savings accounts.

A traditional IRA is just like a Roth in that you are allowed a $5000 maximum contribution (2008*). However, there are two major differences between the two savings plans. With a traditional IRA you are allowed to deduct your contribution from your taxable income. The taxes on future contributions and earnings remain tax deferred until they are withdrawn at retirement. At that time, applicable taxes must be paid. If you own a traditional IRA you won’t be restricted by a maximum income cap.

If you set up a Roth IRA, the contributions would come from income that’s already been taxed. Your contributions are invested and any earnings are accrued tax free. At the time of your retirement, you are allowed to withdraw the funds, also tax free.
In order to qualify to make the maximum $5000 contribution, the maximum income for a Roth IRA is around $100,000 if your single and $159,000 if your married, filing jointly. If you earn more than the maximum income for a Roth IRA, then your maximum allowable contribution is lowered incrementally.

There is one more consideration I’d like to bring to your attention. You can set up your Roth to be self directed. This means that you would decide how to invest your money. Rather than having banks or insurance company personnel make investment decisions for you without your input, a self directed Roth IRA would put the control in your hands.

For example, if you’re not comfortable with investing in the current, unstable stock market, but would rather invest in something much more sound, like real estate, your self managed Roth IRA would allow you to do so. Your trustee or custodian would be obliged to follow your investing instructions while also being responsible for the paper work, meeting regulations and generating financial reports. There are companies that specialize in self-directed IRAs, with a knowledge of investing opportunities such as real estate.

Now that you know where to invest in a Roth IRA, you might also want to look for a management firm that concentrates on self directed IRAs. I believe that’s the best way to invest and earn the maximum income for a Roth IRA and a secure retirement.

*Allowable maximum contribution subject to change annually