Retirement Bucket #2: Contributing to a Roth IRA

If you have already paid all your expenses and built your Short Term Fund, you can take advantage of the Roth IRA.

A Roth IRA is a financial vehicle that lets you invest up to $5,000 per year (2008 limit) in after-tax money, so that it can grow tax free until you are allowed to withdraw it without penalties (at age 59 ½). Since you open a Roth IRA with after tax money, you won’t pay taxes again when you withdraw your money.

The advantages of a Roth IRA are evident: your money will grow tax free and you withdraw it tax free once you're allowed to do so.

There are many other requirements and limitations regarding Roth IRA’s, as well as other advantages. If you want to learn more about Roth IRA’s you can visit the following links:

Why you need a Roth IRA

Top 10 Roth IRA questions