Reorder Checks   For Sale   Links   

Roth IRAs

The Roth IRA is an individual retirement account created by the Taxpayer Relief Act of 1997. Named for former Senate Finance Committee Chairman William Roth, Jr., this IRA offers more incentives to boost your retirement savings, as well as more ways to use your nest egg.

The new Roth IRA offers tax-free growth when you hold it for at least five years and take distributions after you reach 59-1/2. Unlike traditional IRAs, you can keep your account intact beyond age 70-1/2 and can continue to make contributions. Being covered by a retirement plan doesn't affect your ability to contribute.

You can make tax penalty-free withdrawals for several reasons. You can pay first-time home-buying expenses ($10,000 lifetime limit) for you, your spouse, children, grandchildren, or parents. Penalty-free withdrawals are also allowed for death, disability, medical expenses that exceed 7.5% of your adjusted gross income, and to purchase health insurance if you have received unemployment compensation for twelve weeks or more.

You can contribute up to $5,000 a year or 100% of your earned income, whichever is less. If you are married, you can contribute up to $10,000 or 100% of your combined income, whichever is less, between each spouse's IRAs. Workers age 50 and older can play "catch-up" with their retirement savings by contributing up to $1000 a year over the maximum contribution limits.

 If you're married with modified adjusted gross income (MAGI) below $166,000, or single with MAGI below $105,000, you can make annual contributions - up to $5,000. If your MAGI is under $100,000, you can roll your existing IRAs, deductible and non-deductible, into a Roth IRA without penalty. However, if you do, you'll owe income tax on all previously untaxed contributions and earnings.

Please consult a tax advisor to determine how federal, state, and local tax laws affect IRA deductibility for you and whether a Traditional or Roth IRA is best for your situation.