Home Experts Experts Free Quotes Coupons Special Offers Articles Forums Blogs Join Us

hand titleSavism University -> Finance -> Retirement Planning
Roth IRA Basics and Benefits

Bogie Boric articles

 

Can you tell the difference between good and bad debt?
Personal Finance 

Cheap thrills – how to stretch a social budget
Personal Finance 

Comparing Car Insurance Rates Online
Insurance 

Tax benefits of owning a home
Tax Planning 

Make the most out of your 401(k)
Retirement Planning 

View All Articles by Bogie Boric

Retirement Planning Articles

 

Social security, retiree Ponzi scheme $16 Trillion short
Laurence J. Kotlikoff

2010 Retirement-Account Contribution Limits
Telecom Advisor

Retire This Year
WiseSaver

Make the most out of your 401(k)
Bogie Boric

The Social Security Meltdown: A $35 Solution
Stephen L. Nelson, CPA

View All Retirement Planning Articles

Recent Articles

 

Part-time jobs to Help you Fund your Startup
Bus.-General

Building Dreams, One Home at a Time
General

Benjamin, Chaise & Associates-Debt Collection Myths
Bus.-General

How to Protect your Car
General

Ways to Save for Your Child’s College Education
Education Planning

View More Recent Articles

Most Popular Articles

 

File Taxes for Free – It’s Easy as 1-2-3!
Tax Planning

When is the Dog Deductible?
Tax Planning

Health Insurance Explained
Insurance

Beware of paying for a credit fix: It's a scam
Home Loans

Roth IRA Basics and Benefits
Retirement Planning

View Other Popular Articles

Ask Savism Experts

Lower Your Bills, Establish New Services, Find Service Professionals!


getquotebutton

ArtOfSaving Get a free quota

getquotebutton

Find an Event

Fairs, Workshops, Seminars...


getquotebutton

Write a New ArticleSavism University Article

Roth IRA Basics and Benefits

Category: Retirement Planning

The Roth IRA is one of the smartest saving and retirement planning tools available to investors. Unlike the traditional IRA or 401K, contributions to the Roth IRA are not tax deductible, but the benefit of the Roth IRA is the ability to make withdrawals tax-free when you retire.

Other Roth IRA Benefits

 • Contributions can be taken out at any time without taxes or penalties. • Under special circumstances (Qualified Distributions), withdrawals of earnings (capital gains, interest, and dividends) are penalty and tax free.

 • Contributions may be made after age 70 ½ as long as you have earned income. • Since you have already paid taxes up front, there are no minimum distribution requirements after age of 70 ½.

 • At death, funds remaining in your Roth IRA will go to designated beneficiaries (they will be subject to a minimum distribution requirement). This provision makes Roth IRA a great estate planning tool.

What Are Qualified Distributions?

 To be tax-free and penalty free, a distribution of earnings must meet two tests:

1. Withdrawals are taken after the 5-year holding period, and

2. One of the following requirements applies. The distribution is:

 • Made on or after the date you reach age 59 ½,

 • Made because you are disabled,

 • Made to a beneficiary or to your estate after your death, or

 • For the first-time home buyer (up to a $10,000 lifetime limit per person, $20,000 for couples).

Eligibility

You may be eligible to make a regular contribution to a Roth IRA even if you participate in your employer-sponsored retirement plan. Most common way of establishing a Roth IRA is by making cash contributions. In order to be able to contribute up to $5,000 per year to a Roth IRA for 2007-2008 ($6,000 if you are 50 or older) you will need to fulfill both requirements:

1) Your adjusted gross income has to be less than $99,000 if you are single or $156,000 if married filing jointly. The amount you can contribute is reduced gradually and then completely eliminated when your modified adjusted gross income exceeds $114,000 for single, or $166,000 if married filing jointly.

2) You or your spouse must have compensation or alimony income in excess of the amount contributed.

Another way of funding Roth IRA is by converting your traditional IRA. The only requirement is that your modified adjusted gross income is less than $100,000. Please note that the amount converted will be added to your income and taxed at the prevailing tax rates.

Here is the good news

 1) The Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA) will eliminated the $100,000 modified adjusted gross income (AGI) limit effective 2010.

2) Under TIPRA, income from a 2010 conversion of a traditional IRA to a Roth IRA is included in the taxpayer's income over a two-year period, beginning in 2011.

This will provide numerous planning strategies, so contact your financial advisors and start planning early.

Please consult your tax, legal, or investment advisor when making financial decisions. For additional information please visit http://www.irs.gov/pub/irs-pdf/p590.pdf


Spread The Word

Rate This Article
RateRateRateRateRate RateRateRateRate RateRateRate RateRate Rate Rate
Comment This Article
Submit Comment
Comments
Jordan Bauer Jordan Bauer
Date: 3/20/2015
Time: 05:49
Thanks for the advice... :)
Resources / Become Our Partner
banner banner banner banner banner banner banner
Home
Ask Experts
Savism University
Forum/Discussions
Coupons
Special Offers
Become a Member
Request Free Quotes
Events
Webinars
Links - Add Link
Privacy Policy
Business Directory
Blog Directory
Video Directory
National Savings Day
Learn at Lunch
rssfeed RSS Headlines

Add Your Business
Become an Expert
Participate in Discussions
Post New Article
Create a Coupon
Ask a Question
Contact Us
Advertising
About Us
Site Map
Feedback
Connect on Twitter
2017 Art Of Saving
Savism, National Savings Day & United We Save are registered trademarks.