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1. Log onto www.irs.gov and download Publication 590 which gives the rules for IRAs.

2. I held a CPA license from 1964 until my retirement in 1999. I did not open a Roth IRA when they first became available because I did not believe the Federal Government could be so generous. I am making up for that mistake by transferring about $10 K per annum from the regular IRAs I opened with the balance in my 401(k) at retirement to Roth IRAs in the hope that the earnings until the time I need to withdraw the funds will compensate for paying taxes now.

3. Regular IRAs get a tax deduction year by year as funded, but ALL of the withdrawals are "ordinary income" on your return. There is also a minimum annual withdrawal required once you reach 70 and one half years of age.

During the period 1978 - 1982 I deposited $2 thousand per year into a regular IRA [the only kind available at that time] in my wife's name. Total deposits were $10,000. She has withdrawn $23,000 and still has $77,000 left. The magical power of compound interest strikes again.

4. A Roth IRA is funded from "after tax" income. You do not get a tax deduction in the year funded but you NEVER pay taxes on the withdrawals.

Set up a spreadsheet for annual contributions of $3,000, a reasonable interest rate, and one line for each year until you hope to retire showing opening balance, contribution, earnings, and ending balance. You will note that within about six to ten years the annual earnings will exceed the $3,000 annual contribution. Over a thirty or forty year period even 4 or 5 per cent will produce a LOT of income which is TAX FREE when you withdraw it.

There is another side benefit to Roth IRAs. They have no minimum annual withdrawal rate.
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