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ROTH IRAs


 

                   
 

 

If your traditional IRA contributions are not tax deductible, you might consider a Roth IRA contribution instead. Since the Roth IRA was introduced in 1998 many investors have opened Roth IRAs or converted traditional IRAs to Roth IRAs. With a Roth IRA, since your contributions are made with after-tax dollars, your assets can grow tax-free, meaning you’ll never have to pay federal income taxes on your earnings, provided certain requirements are met prior to receiving the distribution. Depending on your situation, tax-free growth could possibly result in a larger retirement nest egg than a comparable investment in a traditional IRA. 

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Just like a Traditional IRA, you may contribute up to the allowable limit of $5,000 or 100% of compensation - whichever is less. If you are age 50 or over, you may contribute an additional $1,000 as a catch-up contribution. Unlike a Tradtional IRA, contributions to a Roth IRA are always made on a non-deductible (after-tax) basis.

Tax-Free Access:  Because your contributions are made on an after-tax basis, if you meet certain requirements they can be withdrawn at any time without tax or tax penalty. However, there may be an early withdrawal penalty and exceptions to tax-free distributions.

Tax-Free Growth:  To benefit from tax-free growth you must follow certain guidelines. Your Roth IRA must have been in existence for at least 5 years, and distributions are withdrawn as a result of:

  • attainment of age 59½
  • your death or disability
  • a qualifying first-time home purchase

Flexibility:  Like Traditional IRAs, Roth IRAs, offer a wide variety of funding options based on your objectives and risk tolerance. Unlike a Traditonal IRA, contributions to a Roth IRA may be made beyond age 70½, if you qualify, so you have the opportunity to continue to build what is potentially tax-free income.

Also unlike a Traditional IRA, a Roth IRA does not require you to begin withdrawals once you reach age 70½, or at any point during your lifetime.

Income Tax-Free Distributions for Beneficiaries:  At your death, your beneficiaries may receive the proceeds of your Roth IRA free from federal income tax. To do so, the Roth IRA must have been in existence for at least 5 years. Roth IRAs will be included in your gross estate and may be subject to federal estate tax. The required minimum distribution rules do apply to your beneficiary after your death.

Rollovers and Transfers:  You can typically transfer assets from one Roth IRA to another without tax liability. Consolidating your Roth IRA assets can help reduce administration costs and result in a more cohesive investment strategy.

Rolling Over Assets from a Qualified Plan:  Currently, you may not rollover assets directly from a qualified plan into a Roth IRA. That limitation will lift sometime this year. Until then, if you qualify and you wish to rollover your qualified plan distribution into a Roth IRA, you must first roll it over to a Traditional IRA and then convert it to a Roth IRA.






 
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Securities and investment advice offered through Investment Planners, Inc. (Member FINRA/SIPC) and IPI Wealth Management, Inc., 226 W. Eldorado St., Decatur, IL 62522. 217-425-6340.
Tomei Insurance Agency is not affiliated with Investment Planners, Inc. or IPI Wealth Management, Inc.
Insuring: Gurnee, Waukegan, Zion, Mundelein, Libertyville, Grayslake, Antioch, Ingleside, Round Lake, Round Lake Park, Round Lake Beach, Beach Park, and Great Lakes, Illinois as well as Kenosha, Racine and Pleasant Prairie, Wisconsin. Along with other counties in Lake County, IL and we're just a short 40 miles north of downtown Chicago.
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