Hello everyone. Can anyone tell me how a Roth IRA works? Also, can my child who is not working open a ROTH IRA?


Thanks :)

Second question first: no. A child is certainly allowed to open an IRA, but the amount that can be contributed is limited to his earned income. Since the child does not work, he has no earned income, and therefore may not contribute to an IRA.

As for how a Roth IRA works - I don't know what you may already know about traditional IRAs, but in essence a Roth IRA is a retirement account that can grow tax-free. With a Roth IRA your contributions are after-tax (meaning you don't get to deduct your contributions like you do with a traditional IRA). But as long as the account is open at least 5 years any withdrawals you take after that are tax-free. Hence the growth in the account is not taxed. This is different than a traditional IRA, where yr contributions may me be pre-tax (you may be allowed to deduct them), and when you take a withdrawal the growth portion and any pre-tax portion that you withdraw are taxable. For both Roth and traditional IRAs any withdrawals you take while you are under age 59-1/2 may trigger a 10% early withdrawal penalty. Do a Google search on "Roth IRA" and you'll find lots of articles that go into great details.

Thank you Ebaines. I live in Chicago IL. I'm guessing I'll have to talk to my banker, but just wondering is there anything I need to look out for before going forward as far as fees or penalty's and stuff of that sort.
I want to get the ball rolling as I am not getting any younger.:)
Oh, I have one more question. We currently changed union locals at work. We now have a new union. I have about 600.00 dollars that the union owes me. I'm wondering can I roll that into a ROTH IRA? :confused:


Thanks again

The major thing is to realize that an IRA is a retirement account - it is not meant to be an account that you dip into prior to qiuting work. Consequently if you take money out prior to age 59-1/2 some (or all) of your withdrawal may be subject to an early withdrawal penalty, and some (or all) may be subject to regular income tax (federal and state) as well. As for fees - ask your banker, but my advice is that if they try to sell you anything that has a fee attached, or that involves mutual funds with sales charges, walk away. You can do better by investing on line through an investment house like Fidelity, Vanguard, Schwab, T. Rowe Price, etc.

Without knowing where that $600 resides, I can't advise you. If it's in some sort of retirement account then you can roll it to a rollover IRA (not a Roth). If it's cash they owe you, then you can invest it in a Roth IRA but it would not be called a "rollover." The term "rollover" applies to rolling or transferring funds from one retirement account to another (like from a 401(k) to an IRA).

So - what do you think Da Bears' chances are this coming weekend? :)

Thanks again Baines. This information was very helpful.
As for the bears, well the colts are out as well as the saints. That's a good thing. I think we are going to the big dance. Can we win? I have faith in my Chicago Bears. Even if we don't make it, it was a good season and look out next year. ;)


Go Bears:D