Explain to me how a Roth IRA works?

Question

do you invest a certain amount of money every year in your Roth IRA?

Answer 1

Earnings on a ROTH IRA are not taxed. The funds you put in are funds that are "after taxes".

If you've earned over $5,000 in 2008 & you're under 49 years of age, you may contribute $5,000. 50 and over, $6,000.

Don't use a bank or insurance company for a ROTH IRA. No load Mutual Funds &/or a discount broker like Charles Schwab or Fidelity Invevestments would be good choices.

Take advantage of this. It's a great gift from the goverrnment to the future you!

Answer 2

www.ira.com

Answer 3

Very simple- the money you put into Roth IRA now is after the taxes are paid when you get a paycheck, when you are ready to take it out (when you retire) you do not pay taxes on it at all.  It's the opposite of the standard IRA.

Answer 4

How much you invest is largely up to you.  The max contribution is currently $5,000 provided you earned at least $5k and your adjusted gross income does not exceed $95,000.  If you fall in that range, you can contribute between $0 and $5,000.  If make a Roth IRA contribution this year, you are not obligated to make additional contributions.  You can decide how much you add (if any) year to year.  Though I encourage you to max out your contributions if you have that ability.