Whats a Roth IRA?
This new type of IRA is named after Senator William Roth, chairman of the Senate Finance Committee and an advocate of Individual Retirement Arrangements. Like traditional IRAs, there is a maximum contribution of up to $2000 per year that can be made to a Roth IRA. Unlike traditional IRAs, no portion of contributions to a Roth IRA can be deducted from taxable income. However, investment earnings within a Roth IRA are not subject to income tax, and withdrawals from the Roth IRA are entirely free of federal taxation and tax penalties under certain conditions. The basic conditions are that the withdrawal occurs after the fifth taxable year of the initial contribution, and that the withdrawal occurs because of death, disability, to cover expenses up to $10,000 associated with a first home purchase, or attainment of age 59 1/2. (Withdrawals of substantially equal periodic payments, medical expenses greater than 7.5% of Adjusted Gross Income, health insurance for certain unemployed, qualifyin
A Roth IRA offers tax-free investing: You pay no taxes on withdrawals made after you reach age 59½ if you’ve owned a Roth IRA for the 5-year minimum holding period. Although contributions to Roth IRAs aren’t tax-deductible, you’re never required to make withdrawals, so your assets can grow tax-free throughout your life. (The beneficiary of a Roth IRA may be required to take withdrawals.) You must not exceed certain income limits to qualify for a Roth IRA. Check our IRAs area for more information.
A Roth IRA is a nondeductible account that features tax-free withdrawals for certain distribution reasons after a 5 year holding period. You must have earned income and fall within certain income guidelines to contribute. No withdrawals are required once the account holder reaches 70 1/2 years of age. You may contribute up to $5,000 per qualified individual in 2009. Individuals age 50 and older may make additional contributions up to $1000 as a “catch-up” contribution. Earnings on the account may grow tax free if certain conditions are met. What’s a TRADITIONAL IRA? A traditional IRA may be tax deductible. Deductibility is based on three factors; (1) active participation in an employer sponsored retirement plan, (2) federal income tax filing status (joint, single, married filing separately); (3) modified adjusted gross income. Earnings are tax deferred, and are taxable at the time of withdrawal. Withdrawals are required at the age of 70 1/2. Contributions up to $5,000 per qualified ind
Unlike in a traditional IRA, your contribution to a Roth IRA is not tax deductible – it’s taxed in the year of contribution. However, the earnings you accumulate are not taxed when used for retirement income. To qualify for a Roth IRA, your income should not exceed adjusted gross income limits. The distributions of accumulated earnings from a Roth IRA could be subject to income taxes and penalties when you are younger than 59-1/2 or if you have not had a Roth IRA for more than five years. A Roth IRA doesn’t need you to take distributions when you reach 70. What’s the maximum IRA contribution for this year? In 2004, you can contribute up to $3,000 annually if you are younger than 50. If you’re over 50, you can contribute up to $3,500 per year. Where can I invest my IRA? You can put your IRA in many approved investments, including mutual funds, stocks, bonds and even real estate. Are there any exceptions to the 10 percent penalty if I withdraw funds from my IRA before age 59 1/2? Yes, th
