Roth IRA

An individual retirement account (IRA) is a personal savings plan that offers specific tax benefits while helping you achieve your retirement goals. IRAs are one of the most powerful retirement savings tools available to you. Even if you're contributing to a 401(k) or other plan at work, you should also consider investing in an IRA. 

You should understand the differences between a Roth IRA and a Traditional IRA before choosing the type of IRA that's best for you. Roth IRA contributions are not deductible, but distributions (including earnings) can be tax free at retirement if certain circumstances exist.1

Benefits

  • Contributions can be withdrawn at any age without taxes or penalties
  • Earnings you withdraw are tax-free after age 59 ½ as long as the account has been established for a minimum of five years
  • Contributions can be made after age 70 ½ as long as you have earned income
  • No required minimum distributions during your lifetime
  • Beneficiaries may pay no income tax on proceeds
  • Wide range of investment options available

Considerations

  • Contributions are made with after-tax dollars and they are not tax deductible
  • Premature withdrawals in excess of contributions are fully taxable and are also subject to an early withdrawal penalty

Details

Eligibility

  • Anyone who has earned income equal to or greater than their IRA contribution amount

    • If you contribute to an employer-sponsored plan such as a 401(k), you are still eligible to contribute to a Roth IRA as long as you meet the Income Limits below
    • If you have no earned income but your spouse earns enough income to cover your contribution as well as their own, you can contribute to a Roth IRA
Income Limits

  • Your Modified Adjusted Gross Income (MAGI) cannot exceed:

    • $120,000 for single filers
    • $177,000 for joint filers
    Contributions are phased out for single filers with a MAGI between $105,000 and $120,000 and for joint filers with a MAGI between $167,000 and $177,000
Annual Contribution Limits2
  • $5,000 under age 50
  • $1,000 additional catch-up contribution if age 50 and over
  • You may contribute simultaneously to a Traditional IRA and a Roth IRA (subject to eligibility) as long as the total contributed to all (Traditional and Roth IRAs) does not exceed described limits 
Tax Considerations (See your tax advisor)
  • Contributions can only be made with after-tax dollars
Types of Investments
  • Stocks, bonds, mutual funds, exchange-traded funds (ETFs), U.S. Treasuries, Brokered CDs, unit investment trusts (UITs) and annuities
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Disclosures:

  1. Earnings you withdraw are tax-free after age 59 ½ and the account has been established for a minimum of five years.
  2. Limits apply for 2010 and are subject to change in the future.
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