Roth IRA
Roth IRA
What is an IRA?
An individual retirement arrangement (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.
What is a Roth 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 tax-deductible, but distributions (including earnings) can be tax-free at retirement if certain circumstances exist.*
Benefits
- Contributions can be withdrawn at any age without taxes or penalties.
- Earnings you withdraw are tax-free after age 59½ as long as the account has been established for a minimum of five years.
- Contributions can be made after any age if you (or your spouse if filing jointly) have taxable compensation and your modified adjusted gross income is below certain amounts.
- No required minimum distributions if you are the original owner.
- Beneficiaries may pay no income tax on proceeds.
- A wide range of investment options is available.
Considerations
- Contributions are made with after-tax dollars and are not tax-deductible.
- Premature withdrawals in excess of contributions are fully taxable and also subject to an early withdrawal penalty.
Details
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Eligibility
• Anyone who has taxable compensation equal to or greater than their IRA contribution amounto 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.o If you have no earned income but your spouse earns enough income to cover your contribution as well as his or her own, you can contribute to a Roth IRA. -
Income Limits for 2021
• Your Modified Adjusted Gross Income (MAGI) cannot exceed:o $140,000 for single filerso $208,000 for joint filersContributions are phased out for single filers with a MAGI between $125,000 and $140,000, and for joint filers with a MAGI between $198,000 and $208,000. -
Annual Contribution Limits
•$6,000 under age 501•$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**
Contributions can only be made with after-tax dollars.
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Types of Investments
Stocks, bonds, mutual funds, exchange-traded funds (ETFs), U.S. Treasuries, Brokered CDs, unit investment trusts (UITs), and annuities
Disclosures:
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Effective Jan 1, 2019 individual annual contribution limit is raised from $5,500 to $6,000.
*Earnings you withdraw are tax-free after age 59½ if the account has been established for a minimum of five years.
**Consult your tax or legal advisor for tax planning relating to your current situation.
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The information provided on this website is not meant as a recommendation or endorsement of any specific security or strategy. An individual’s situation can vary; therefore the information provided above should be relied upon only when coordinated with individual professional advice.
Mutual funds, annuities, and other investment products:
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