ROTH IRA
What is a ROTH IRA?
A ROTH IRA is an IRA where contributions are made with after tax funds and are non-deductible. However, all qualified withdrawals are free from federal income tax. For example, if $20,000 is contributed to the account and it increases in value to $80,000, the owner realizes $60,000 in tax-free earnings.
Who may Contribute?
Anyone with earned income, regardless of participation in an employer sponsored plan, who falls within the Adjusted Gross Income (AGI) limits may contribute to a Roth IRA.
Other Special Features?
ROTH IRAs also allow people with earned income who are over age 70½ to contribute, and there are no required distributions.
When may I access my IRA?
Distributions from contributions can be made any time without taxes or penalty. Distributions from earnings are tax-free if your initial contribution to the account was made at least five years ago and:
- you're age 59½
- you're disabled
- you're purchasing a first home
Payments made to your beneficiaries after the five-year period are also tax and penalty free. Payments made before the end of the five-year period are penalty free.
Distributions from earnings are not subject to the 10% penalty as long as you qualify for an exception:
- same as exceptions for Traditional IRAs
For more information about IRAs and other retirement plans, contact us.
