Good morning and happy Friday!
The recent frenzy regarding Roth IRA’s has been centered around Peter Thiel and his purchase of nearly 2 million shares of PayPal in 1999. Yes, his initial $2,000 investment turned into $5,000,000,000.00 (billion). What is unclear is whether or not Thiel bought the shares below market value, which could potentially void some of his non-taxable earnings.
We wanted to provide a no non-sense overview of Roth IRA’s below.
Unlike a traditional IRA, a Roth IRA allows your investments to grow tax free. Roth contributions allow for tax free withdrawals of principal and in certain cases, tax-free withdrawals of earnings.
To draw earnings tax free, an account holder must meet the following:
1) Maintain the account for 5 years
2) Reach age 59 1/2 (subject to change)
3) Become disabled
4) Draw funds for first time home purchase
For 2021, the maximum contribution to Roth IRA’s is $6,000. This number jumps to $7,000 if you are 50 or over.
Have a great weekend!