Great Way To Invest

• Anyone with taxable earned income can make a contribution from his paycheck or savings that have been already been taxed. You are not taxed on your capital gains if you leave them in your account for five years and don't take them them out until you are 59 1/2. If you follow these rules, the money earned in a Roth IRA is tax free upon retirement. These attributes makes opening a Roth IRA a good investment option, particularly for young investors. If you are a teenager with a some earned income such as a part-time job, you can open a Roth IRA account.
  
  

Single and Head of Household Filers

• Single and head of household tax filers under 50 years old with an adjusted gross income of less than $105,000 can contribute a maximum of $5,000 to a Roth IRA. A single person or head of household filer 50 years and older can contribute $6,000 with the same AGI. However, if you earn between $105,000 and $120,000, the amount you can contribute is reduced. And, if you earn more than $120,000, you cannot contribute to a Roth IRA.
  
  

Investing Early

• It is a good idea to invest in a Roth IRA, particularly for a young person with little earned income. Life's demands may reduce your ability to invest as you get older and have more responsibility. It is also a good way familiarize yourself with various investment asset classes. For example, as an umbrella account, a Roth IRA allows you to invest in exchange-traded funds, money market, mutual funds, stocks, and bonds.
  
  

Early Withdrawal Penalty

• If you open a Roth IRA and withdraw funds from it early, you are taxed a 10 percent early withdrawal penalty on the distribution. There are exemptions for early withdrawals. For example, the IRS provides an exemption if you are disabled or paying for higher education costs (as long as the distribution does not exceed the expenses). If possible, avoid an early withdrawal from your Roth IRA.