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This is because in a 401k, the employee’s contribution is usually matched by the employer. This is extra money but one should not disregard the power of a Roth IRA.
A Roth IRA is vehicle for investing that allows you invest your contribution in just about anything you want -- bank certificates of deposits, stocks, bonds, mutual funds and even real estate. A whole end investment market opens up which is not offered by any other retirement savings plan.
The best part is that earnings in a Roth IRA are allowed to grow tax exempt and if you follow the rules and guidelines, you will not have to pay a cent to Uncle Sam. If you face any financial difficulties, you can withdraw your contribution (not your earnings) without facing a penalty or paying taxes. In addition, if you want to purchase your first home, you use the funds from your Roth IRA to pay a down payment on your home. You can also withdraw money from a Roth IRA to pay for higher education either for yourself or eligible family members.
For the year 2007, the maximum contribution to a Roth IRA is $4,000 for those who are 49 and less. It is $5,000 for those who are 50 and above. In 2008, the contribution levels have increased and it is $5,000 for people who are 49 and below and $6,000 for those aged 50 and above.
Like any other retirement savings plan, even the Roth IRA has a deadline to contribute. The deadline for contribute to a Roth IRA is until your federal tax return is due. This is usually April 15 of the following year and excludes all extensions.
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