Craig Wear, a CFP, breaks down three Roth IRA mistakes: over-contributing past the $7,000 limit triggers a 6% yearly penalty, withdrawing early on earnings before 59½ costs you, and leaving cash sitting there instead of buying index funds like VOO or VTI.
$7,000 annual limit.
6% penalty each year the excess remains.
Before tax day.
59 and a half years old.
VOO and VTI.
Avoid these costly IRA mistakes before you start investing. Number one over contributing. If you go past the $7,000 annual limit, you're going to owe a 6% penalty each year it sits there, so withdraw the excess before tax day to avoid it. Number two Withdrawing early. You can pull out contributions anytime, but not your earnings. You've got to be at least 59 and a half years or older. And then there's a five year rule that you need to take into consideration as well. Number three not investing the money. Open a Roth ira. Really not enough? You need to make sure that you invest inside of it instead of just sitting there. In a cash account, you can think about index funds or exchange traded funds like VOO or VTI to grow your money.
