Retirement PlanningRoth IRAs
As with a Traditional IRA, a Roth IRA lets you contribute up to $4,000 per year.* You cannot deduct your contributions to a Roth IRA, however, a distribution from a Roth IRA is income tax-free when it is held for five years AND:
-
It is taken after attaining the age of 59 1/2.
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Occurs due to death or disability.
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Is used for a qualified first time home purchase (up to $10,000).
Use this table to find out if you qualify:
| Filing Status |
FULL Roth Contribution if MAGI** is
|
Partial Roth Contribution if MAGI** is
|
No Roth Contribution if MAGI** is
|
| Single |
$95,000 or less
|
Between $95,000 and $110,000
|
$110,000 or more
|
| Married/Joint |
$150,000
|
Between $150,000 and $160,000
|
$160,000 or more
|
*Combined contributions to Traditional and Roth IRAs cannot exceed $4,000 or 100% of earned income in any given year. Withdrawals prior to age 59-1/2 may be subject to a 10% federal tax for early withdrawal penalty. Penalty may be exempt for certain higher education expenses, and for a qualified first time home purchase (with a lifetime maximum of $10,000).
**MAGI (Modified Adjusted Gross Income)
- What is a Roth IRA?
- Who is eligible to contribute, and how much?
- Are my contributions tax-deductible?
- Can I convert my existing IRA into a Roth?
- What are the tax consequences?
- When can I withdraw my funds?
- Am I required to take distributions?
What is a Roth IRA?
A Roth IRA is a type of Individual Retirement Plan that allows eligible individuals to invest up to $4,000 of earned income annually, tax-free. Unlike other IRAs, you are not required at age 70 1/2 to take a minimum distribution and may continue to make contributions with earned income.
Who is eligible to contribute, and how much?
- Any individual who has earned income.
- You may contribute up to a maximum of $4,000 of earned income each year if your Modified Adjusted Gross Income (MAGI) is no more than $160,000 (married filing jointly) or $110,000 (single filer).
- Even if your spouse is not working, you may contribute up to $4,000 for your spouse's IRA if your earned income allows.
Are my contributions tax-deductible?
Contributions to Roth IRAs are not tax-deductible.
Can I convert my existing IRA into a Roth?
You are eligible to convert your existing Traditional IRAs into a Roth IRA if your Maximum Adjusted Gross Income (single or married filing jointly) does not exceed $100,000 in the year of the conversion.
What are the tax consequences?
When you convert or rollover an existing IRA into a Roth IRA, you must pay taxes on any earnings and pretax contributions that you convert.
- You can withdraw funds at any time before reaching 59 1/2, but your withdrawal is then subject to a 10% federal early withdrawal penalty and any additional penalties that may apply.
- The following exceptions apply to the early withdrawal penalty:
- Disability
- Qualifying medical expenses (under certain conditions)
- Qualifying education expenses
- Unemployment (under certain conditions)
- Qualifying first home purchase
- Death
- Levy
A qualified distribution from a Roth IRA may be withdrawn tax and penalty free* (fees may apply if you are breaking terms before account maturity).
*Certain qualifications apply. Consult your tax advisor for more information.
Am I required to take distributions?
- Unlike Traditional IRAs, there is no required minimum distribution at age 70 1/2.
- Your earnings can continue to grow until you need them.
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