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Retirement Planning |
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Individual Retirement Accounts
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The
Roth IRA: Options to meet your IRA Objective
Concern
regarding the instability of Social Security continues
to grow, and Americans are looking for new ways to secure
their financial future. The Roth IRA gives
you the ability to invest your after-tax dollars today,
let the investment grow tax-deferred, and take qualifying
withdrawals tax-free.
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Is
investing for retirement important?
Many
ideals are changing in today's society. For Instance:
- The
trend of changing employment more frequently does
not allow individuals to acquire great reserves in
company pension plans.
- Many
new entrepreneurs striking out on their own cannot
offer retirement options to themselves or their employees
until the company is more financially secure.
- Social
Security is no longer seen as the answer to retirement
funding.
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What makes the Roth IRA so unique?
Imagine
for a moment that you have just received a paycheck from
your company. You look at your payroll summary and notice
that there are no federal income taxes withheld. Your
initial reaction is that something is wrong. It's not,
if this check is from your Roth IRA. Two factors make
this possible:
First, the money you contribute to a Roth IRA has already
been taxed. So the principal amount is never subject to
taxes or penalties in the future, as long as you stay
within the contribution guidelines.
Second, this retirement plan allows the money you contribute
to grow tax-deferred. If you do not withdraw any of the
earnings until you have had a plan for
at least five years, and satisfy one of the qualifying
events those tax-deferred earnings become tax-free. |
Who is eligible?
Unlike
the Traditional IRA, there is no 70.5 age limit on making
contributions. You simply need to have earned income equal
to the amount you contribute up to a maximum of $3,000
($6,000 combined for spouses) per year.
(There are income thresholds which may reduce the amount
you can contribute.) |
How much can I contribute?
Individuals
may contribute up to $3,000 per year if their modified
adjusted gross income (MAGI) is less than $95,000. If
an individual's Magi is between $95,000 and $110,000,
they may contribute a reduced amount adjusted for their
income. Married couples filing jointly may contribute
up to $3,000 each if their MAGI is less than $150,000.
Contributions for joint filers are reduced for Magi's
between $150,000 and $160,000.
Roth IRA contributions may not be made by individuals
with MAGI of more than $110,000, or couples
with MAGI of more than $160,000. |
When can I use my IRA assets?
If
you satisfy two conditions, you may make tax-free and
penalty-free withdrawals from your Roth IRA. First, a
plan must have been - open for a minimum of five years.
Second, the withdrawal must be made after the occurrence
of one of the following events:
- Age
59.5
- Death
- Disability,
or
- First
Home Purchase
Distributions
which meet the above requirements are referred to as
"qualifying distributions.'' While you may take distributions
from your Roth IRA at any time, distributions which
are not qualifying distributions will be subject to
taxes (and in some cases early distribution penalties)
to the extent they exceed your aggregate contributions
to Roth IRAs.
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Can I move money from
my traditional IRA to my Roth IRA?
The
answer is "Yes". There are specific rules that govern
the process of converting funds from a Traditional IRA
to a Roth IRA. Some of these rules include:
- Your
MAGI must be $100,000 or less.
- If
you are married, you must file a joint income tax
return.
- You
must pay taxes on all the pre-tax dollars you move.
- The
conversion must be completed within 60 days.
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We'd like to hear from you.
If you have any questions or would like to speak with
a transition specialist directly please contact us at:
888-925-57830 |
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