What is the Roth IRA?
The Roth IRA is a retirement account to which an eligible participant can
make nondeductible contributions of up to $2,000 a year. Unlike a traditional
IRA in which your earnings are tax-deferred, Roth IRA earnings can be
tax-free. There are numerous options for the investment of Roth IRA contributions.
The Roth IRA allows you to withdraw the amount of your contributions
at any time, without tax and, in most cases, penalty free. Distribution
of earnings will also be tax free, provided that you have been a participant
in the Roth IRA for at least 5 years and the money is distributed:
· after the age of 59 ½
OR
· to purchase a first time home (up to $10,000)
· due to the permanent disability of the account holder
· to a beneficiary after your death
Furthermore, unlike the traditional IRA, you can make contributions
as long as you have earned income. Also, you will not be required to
begin taking distributions after age 70 ½.
Who is eligible to participate in a
Roth IRA?
Single filers with adjusted gross income of $95,000 or less and couples
with adjusted gross income of $150,000 or less with earned income are
eligible to contribute a maximum of $2,000 each to a Roth IRA. If your
adjusted gross income exceeds these levels, you are limited to a smaller
maximum contribution level. To be eligible for the Roth IRA, the adjusted
gross income cannot exceed $110,000 for single filers and $160,000 for
couples filing jointly. Individuals investing in an employer sponsored
retirement plan such as a 401(k) or pension plan are also eligible for
participation in a Roth IRA, provided the above income guidelines are
met.
It's worth noting that you can contribute to both a traditional IRA
and a Roth IRA , but your total contribution cannot exceed $2,000 per
year.
Conversion of an existing IRA to a Roth
IRA
You may convert an existing IRA to a Roth IRA if you have an adjusted
gross income below $100,000. You can determine what your adjusted gross
income is by looking at your most recent tax return. Something to keep
in mind is that if you convert your existing IRA to a Roth IRA, you must
pay all taxes owed in the year that the IRA is converted. We can help
you determine whether it is to your benefit to convert your existing
IRA. Simply stop in or give us a call.
How do I find out more about the Roth
IRA?
Simply see any of our IRA representatives. We will explain the nature
of these accounts, your investment options and help you establish your
new Roth IRA.
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