Most employed individuals who are saving up for their future open an Individual Retirement Account. An IRA is a type of investment vehicle which allows employed individuals to make contributions as long as they are earning a taxable income during the year. When it comes to the type of IRA plan, the Roth IRA is preferred by most individuals. Just like the other type of IRA plans, there are Roth IRA rules that the account holders must know and get themselves familiar with. These rules are needed in order to get the most benefits that a Roth IRA could provide to its account holders.

The main reason why many people prefer to open a Roth IRA among others is that the contributions are taxed right at the time these are made. This allows the contributions to grow tax-free profits. And if the Roth account holders will strictly follow the Roth IRA distribution rules, they may be able to make tax-free withdrawals later on. In order to be eligible for tax-free withdrawals, the account holders must meet the parameters that need t be met, which are in accordance with the rules and regulations.

Two of the major parameters that the Roth account holders must meet are the age limit and the holding period. It is required that the Roth account holders must be at least 59 and 1/2 years of age before they could make eligible withdrawals from Roth. Also, it is needed that the money must have stayed in the account for at least five years before this may be withdrawn — this is the holding period rule that all account holders must meet.

There are some instances that may allow the Roth account holders to take tax-free withdrawals at a limit amount. For instance, if the money will be used for buying his first home, the Roth IRA holder may be considered for tax-free withdrawal at a limited amount. If the account holder will use the money to pay for a higher education, this may also allow him to take a limited tax-free withdrawal. The same goes if he gets physically disabled as well. With Roth IRA, there is no mandatory distribution required at age 70 and 1/2 years old.