Roth IRAs, Explained

Q

What are Roth IRAs? — G.C., Dell Rapids, South Dakota

A

Individual retirement accounts come in two varieties — traditional and Roth. With a traditional IRA, your contributions reduce your taxable income, shrinking your tax bill for the year. For example, if you earn $66,000 and contribute $6,000, your taxable income drops to $60,000. When you withdraw the money in retirement, it’s taxed as ordinary income to you.

With a Roth IRA, you get no upfront tax break for your contributions; however, if you follow the rules, your eventual withdrawals can be completely tax-free. That can be a big deal: If you contribute significantly to your account over many years and that money is invested effectively, you might end up with hundreds of thousands of dollars in your account, available tax-free in retirement.

For both 2021 and 2022, contribution limits for traditional and Roth IRAs are $6,000, plus an additional $1,000 for those 50 and older. Note that the contribution deadline for IRAs is not Dec. 31, but the tax-filing deadline for the year. That means contributions for 2021 can be made until mid-April of 2022.

Also note that 401(k) accounts also come in traditional and

Roth varieties. Learn more about retirement topics in our “Rule Your Retirement” service at Fool.com/services. ***

Q

Where can I look up a company’s historical stock prices? — R.P., Pearl, Mississippi

A

Try calling the company’s investor relations department and asking. Or head to a website that offers a lot of stock data: At

Finance.Yahoo.com, for example, you can type in the company’s ticker symbol, and once you’re on its quote page, click on the “Historical Data” link.

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