Roth IRAs are a great way to save for retirement and potentially save on taxes. Contributions to the Roth IRA are not taxable because they are usually made with money after taxes and you can't deduct them. The money invested in the Roth IRA grows tax-free, and withdrawals are tax-free after age 59 and a half, provided the account has been open for at least five years. Contributions to a Roth IRA are not deductible, but qualifying distributions or distributions that are a return of contributions are not taxable.
If you make a distribution of Roth IRA earnings before you turn 59 and a half and before the account turns five, earnings may be subject to taxes and penalties. All regular contributions to the Roth IRA must be made in cash; they cannot be in the form of securities or property. There are phase-out amounts based on your modified adjusted gross income (MAGI) if you want to invest in a Roth IRA. If you contribute too much to your Roth IRA in a year, you may have to pay a 6% excise tax on the additional amount.
If you have multiple retirement accounts, the Roth IRA may be the best option for a coronavirus-related distribution.
