Many people inquire as to the best Roth IRA; the answer is simple, it is yours, the Roth IRA that makes money for you. Of course, one might feel the same about the IRA that makes money for the wife, and children and other dear ones. The point is that the Roth IRA is an empty box; the owner must do something to fill it with assets. The first step is to open an IRA account and begin to deposit the annual maximum of $5,500 per year. Costs conscious investors will likely choose a discount brokerage company or a no load mutual fund to host the account. These are the low cost or free ways to open an account and use it to accumulate wealth. Discount and no load investment firms charge much lower fees for their services and when making numerous purchases of stocks and bonds, the fees for each purchase can add up.

Rules and Flexibility

One can withdraw contributions to a Roth account at any time with no penalty. One cannot withdraw earnings in the Roth account before age 59.5 without a ten percent tax penalty. After five years, one can withdraw earnings tax-free for limited purposes like education expenses or buying a first home. The Roth offers flexibility, and one continues to enjoy the use of contributions.

Accumulating Wealth

The Roth account with $5,500 or less is the beginning. The next step is to invest in something that will earn money. One can choose to research the stock market and pick stocks or bonds; depending on how well and wisely one chooses, the securities could gain or lose value. There is certainly more safety in an investment with a long record of success and which has professional management. One can get the benefit of a broad section of the market by investing in a mutual fund.

Advantages of Funds

When selecting a mutual fund there once again are many choices to make because there are a large number of available funds. Some charge higher fees for active management, others charge little using passive management like indexes. One can use many methods such as picking among those with the highest yields, best dividend payments, or best long-term track record for performance. Some investors choose by examining the policies of the fund and looking at the distribution of investments. For example, a fund might invest heavily in bonds, Information Technology or health care. One can choose on the basis of the growth forecasts for that sector, or for the particular companies in the portfolio.

Picking Investments

Indexed funds offer yet another method of selecting and investing. Indexed funds mimic the performance of a list of companies like the S&P 500. They do so by investing in a group or basket of stocks the reflect the makeup of the S&P 500, which are U.S. corporations with high levels of capital assets backing their securities. Indexed funds offer groups of stocks, bonds, real estate, and other investments that can meet the investor’s goals. Some investors prefer regular dividends, and income. Those taking a longer view might prefer a fund that focuses on building equity and long-term value. The wide variety of indexed funds helps match the investment to the investor’s goals. One select the market coverages to add diversity and protection against downturns in one or more areas of the market.

Retire Tax Free

The key aspect of accumulating earnings in the Roth IRA is the main purpose. The earnings that grow in the account from interest, compounding, and returns on investments are not taxable. The earnings can grow to unlimited amounts under current law. Contributions can continue past age 70 when other investments such as 401(k) and traditional IRAs must close. Tax-free income for retirement is a worthwhile goal for most investors, and a Roth IRA is ideal for that role. It can function independently of other retirement and pension benefits.