Roth IRA Basics

  • This retirement account can be used in many ways to benefit you and your family. You can use it as a college account for your children. You can use it as a down payment account for your home purchase. You can use it as an emergency account for your family. Finally, you can use it as a retirement account, which is exactly what it was initially designed to be. Let’s look at the basics.


  • Your money will go into the account after tax. This provides you the opportunity to access those contributions any time in the future without paying a penalty or taxes on the withdrawal (this is the emergency account option). Your money will grow tax-deferred (you will not pay tax on your earnings in the year that you receive them). Your money will be tax-free if you follow the rules on when you can pull the money out (research the rules carefully before accessing your earnings). Now let’s look at where you might want to start your Roth.


  • Go to to open your account. Why? You will eliminate commissions as you invest your money (no middlemen who take a cut before your money starts working for you). You will have a wide selection of investment options. (Stick to index mutual funds or target retirement funds that contain index funds.) It will cost you very little (index funds have minimal fees). You will deal with a very successful and large investment organization. (Vanguard holds nearly 2 trillion dollars in investment money.) This is where I keep my Roth IRA and until someone does it better; this is where I will continue to keep it (as a reminder, I have absolutely no affiliation with Vanguard).


  • What investments do you select to place in your Roth IRA? A good place for many will be the Target Retirement Funds (you need a minimum of $1,000 to open an account). Simply save your money in the bank until you have the $1,000 and then go to and get started. When you are ready, select the Target Retirement Number that suits your time horizon. Accounts outside of the Target Date funds will require $3,000 to get started and you will need $10,000 or more to access the admiral shares which will cut your expenses even more dramatically.


  • If you were using your Roth account for a college fund then you would select the number that fits the year that your child would start college. If you were using it to save for a down payment on a home, you would select the number that fits your timeline to buying a home. If you were using it for retirement then you would select the year in which you expect to retire and start drawing on the funds. If you were using it for your emergency account you would select the lowest number possible. Select the investment that meets your particular situation.



  • The Roth IRA could be your ticket to a brighter financial future. Educate yourself thoroughly and ACT.