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Roth IRAs

What is a Roth IRA?

The Taxpayer Relief Act of 1997 created the Roth IRA, which allows tax-free withdrawals. Contributions to a Roth IRA are not deductible and the maximum annual contribution is the lesser of 100% of compensation or $5,000. Non-working spouses may also contribute up to $5,000 to a Roth IRA. For individuals age 50+, contributions may be increased by $1,000. Contributions may be made beyond age 70 ½ and qualified distributions from a Roth IRA are tax-free, subject to IRS limitations. There are no required minimum distributions on Roth IRAs.

Beginning in 2010, individuals may convert their Traditional IRA to a Roth without regard to income levels or tax-filing status. Special tax considerations will be available in 2010.

Can I still contribute to a Roth IRA if I’m older than 70 ½ and I’m still working?

Yes, provided the contribution does not exceed your earned income for the year and you meet AGI eligibility guidelines.

When may I withdraw my Roth IRA earnings income tax free?

Roth IRA earnings may be withdrawn tax-free if your Roth IRA has been established for at least five years and one of the following apply:

  • Age 59 ½
  • Disability
  • Death
  • First-time home purchase ($10,000 lifetime limit)

Can I have both a Traditional and a Roth IRA?

Yes, you can. But remember that you can only contribute up to $5,000 per year to any combination of Traditional and Roth IRAs that you have. You cannot contribute $5,000 to each.

When am I required to begin taking distributions from my Roth IRA?

You’re not required to take distributions from a Roth IRA as long as you live. You can allow your money to grow in a Roth IRA free of current taxes for as long as you choose.

This site is provided for your information and does not constitute tax advice. Please consult with your accountant or tax advisor for specific guidance.

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