Many factors should be considered when choosing beneficiaries of retirement plan assets.
What is a Roth IRA?
A Roth IRA is an individual retirement plan that is subject to the rules that apply to a traditional IRA. It can be either an account or an annuity. To be a Roth IRA, the account or annuity must be designated as a Roth IRA when it is set up. A deemed IRA can be a Roth IRA, but neither a SEP-IRA not a SIMPLE IRA can be designated as a Roth IRA.
What is a Traditional IRA?
A traditional IRA is any IRA that is not a Roth IRA or SIMPLE IRA
You can have a traditional IRA whether or not you are covered by any other retirement plan. However, you may not be able to deduct all of your contributions if you or your spouse is covered by an employer retirement plan.
Contributing to IRAs:
Individuals can make IRA contributions up to the lesser of
1) The prescribed limit for the tax year of
2) 100% of the individual's compensation
Compensation includes wages, salary, other amounts derived from or received for personal amounts derived from or received for personal services actually rendered (including self employment income and alimony).
For married couples, IRA contributions can be made for each spouse if the combined compensation of both spouses is at least equal to the contributed amount and they file a joint return.
Benefits of an IRA
An IRA allows the average person to set aside money (tax-deferred, some contributions even tax-deductible) for retirement that could also be invested and grow throughout the years.
