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Roth IRA

Summary

Retirement in the Riverbend has a lot to offer, so let's make the most of it. The Roth IRA gives you flexibility in saving for your future. Choose from fixed-term interest rates, variable interest rates, and money market rates to fund a Roth IRA. It's easy to get started with as little as $250 up to $5,000 per year ($6,000 for those over 50).

A Roth IRA may be right for you if:

Your adjusted gross income is less that $166,000 for married taxpayers, or less than $105,000 for single taxpayers
You want to make contributions after age 70½
The ability to make tax-free distributions later is more important than tax-free contributions now

Maximum Annual Contributions:

The maximum annual contribution to a Roth IRA is:

$5,000 ($6,000 for those over 50) or 100% of earned income, whichever is less;
Reduced dollar-for-dollar by contributions made to a Traditional IRA for the same tax year; and
Phased out for singles with adjusted gross income (AGI) of more than $120,000 and married couples filing jointly with AGI of more than $176,000

Taxes

Tax-free Retirement Income:

Contributions to a Roth IRA are not deductible, but withdrawals are generally tax-free under these circumstances, when you need the tax break the most:

The purchase of a first home*
Any time after age 59½
You become disabled or die

* Withdrawals for this purpose are limited to a lifetime cap of $10,000.

Converting

Converting An Existing IRA to a Roth IRA:

If you already have an existing IRA, you may keep it or convert it to a Roth IRA. To be eligible for conversion, your MAGI must not exceed $100,000 and your tax filing status cannot be "married filing separately." Remember that the amount you convert will be subject to ordinary income taxes in the year of conversion.

Consider Your Reason for Converting:

Do you want to avoid taking Required Minimum Distributions during your lifetime?
Do you want to withdraw your IRA fund tax-free during your retirement years?
Do you want to be able to make contributions after age 70 1/2?
Do you have available funds outside your IRA to pay the income taxes associated with the conversion?
Will the increase in AGI from the conversion not adversely affect other deductions or your tax rates?

If your answers to these questions are yes, conversion may still make sense. Be sure to consult your tax advisor for professional advice on the conversion's tax implications.