Roth IRA questions

I understand the basic principle behind a Roth IRA. I make a payment into my Roth IRA and pay taxes on it at that time. Then it grows and then when I take money out I don’t pay taxes on my distribution. (Provided that I’m at least 60 years old and the money’s been in there at least 5 years and yada yada.)

But I can’t find information on exactly how tax-free it is. For instance, since there’s a tax on dividends, if I put my Roth IRA money into an equity fund that pays dividends, do I still pay tax on that? What about capital gains?

Also, let’s say that before I reach age 60 I decide to shift my Roth IRA investments from one fund to another. Do I have to pay any taxes at that point?

Not exactly. You put monty into a Roth IRA and you don’t get a tax deduction. But, it’s not like you pay any special additional tax for contributing to a Roth. It’s just that since you don’t get a deduction and you must have income to contribute, it’s assumed that the money you are putting into it already has been taxed.

No, and no.

Nope. You can move them around as much as you like.

The Motley Fool has a good section on it’s site about Roth IRA’s…

http://www.fool.com/money/allaboutiras/allaboutiras.htm

Hm - why do contributions to ROTH IRA increase my federal tax refund?

I dunno, are you 100% sure it’s a Roth IRA? There are many IRAs, but not all are Roth IRAs (in fact, most aren’t).

I’m not an accountant though so maybe I’m missing something here.

Also, it’s just “Roth.” It doesn’t stand for anything, it’s named for Senator Roth who I assume was its chief sponsor.

If you make below a certain amount, retirement contributions get you some tax benefits even if its Roth.

Saver’s Credit.