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Roth IRAs

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A Roth IRA is a non-deductible account that features tax-free interest, capital gains and withdrawals for certain distributions (home purchase or disability) after a five-year holding period.

You may contribute up to 100% of your compensation or $5,500 whichever is less, as long as your Modified Adjusted Gross Income (MAGI) does not exceed certain limits (see table below). It's important to note that $5,500 is the aggregate amount that you can contribute to Roth and/or traditional IRAs in a given year. For example, if you contribute $500 to a traditional IRA, the most you could contribute to a Roth IRA is $5,000 for that year.

 

*You do not get a tax deduction for your Roth contribution. The 10% IRS penalty does not apply to earnings you withdraw when you take any of the qualified distributions. This information is intended to act as a guide to estimate your allowable contribution limit. Contact your Tax Advisor/Retirement Specialist for further information.

Catch-Up Contribution
If you are 50 years of age or older, you may contribute an additional $1,000 "catch-up" contribution for a total annual contribution of $6,500.

Roth Conversions

A conversion provides the means for a Traditional IRA owner to move his/her IRA assets into a Roth IRA in order to take advantage of the possible tax-free and penalty-free benefits that are not available in a Traditional IRA.

 

Converting assets from a Traditional IRA to a Roth IRA is a taxable event, since assets are being moved from a pre-tax investment to an after-tax investment. 

 

Individual circumstances and future assumptions will determine whether a conversion might be beneficial.  An IRA owner should always consult his/her tax or legal professional for help in making the right decision.

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