Understanding Roth IRA Contributions and Tax Implications
Summary:
- The main problem reported by the user revolves around understanding how contributions to a Roth IRA work, particularly regarding the tax implications.
- Contributions to a Roth IRA are made with post-tax money, meaning taxes have already been paid on those funds.
- Clients typically transfer funds from their bank account, which were received from their paycheck, into their Roth IRA.
- Once the funds are in the Roth IRA, users can trade and invest them as they wish.
- At tax filing time, users will receive a tax form detailing their Roth contributions, which will be considered for tax purposes.
- For more detailed information, users are encouraged to visit the provided link to learn more about Roth IRAs.
Here’s the full thread
Hey, @Garrett! We’re happy to help out with this.
The contributions you make to a Roth IRA are made with post-tax money, meaning the taxes have already been paid.
Generally clients contribute funds they’ve received from a paycheck of some sort that has been deposited to their bank account. From there, they transfer that post-tax money into their Roth IRA.
Once the post-tax money is in the Roth IRA, you can trade and invest the funds as you wish. When you go to file your taxes at the end of the year, you will receive a tax form showing the amount you contributed to your Roth and will be taxed on that amount.
You can learn more about the Roth IRA here: https://www.fidelity.com/retirement-ira/roth-ira
This was just a quick overview, so if you have other questions about how the account works, please follow up here; we’re happy to help! 🟢