If you qualify (based on your Adjusted Gross Income) you can make non-deductible contributions into a Roth IRA. The primary benefit of this type of IRA is that it offers the ability to not only let your money grow on a tax-deferred basis, but, under qualifying conditions, make tax-free withdrawals. That can result in a significant advantage when you need the money most.
You are eligible to contribute to a Roth IRA if you meet the following income requirements:
| Single Filers |
Full contribution possible
if Adjusted Gross Income
(AGI) does not exceed: |
$95,000 |
| Partial contribution
is permitted if AGI does not exceed: |
$110,000 |
If AGI exceeds $110,000 for an individual, contributions cannot be made
to a Roth IRA. You may wish to consider an alternative such as an annuity.
| Married Filers (providing a joint tax return) |
Full contribution possible
if Adjusted Gross Income
(AGI) does not exceed: |
$150,000 |
| Partial contribution
is permitted if AGI does not exceed: |
$160,000 |
If AGI exceeds $160,000 for a married couple, contributions cannot be
made to a Roth IRA. You may wish to consider an alternative such as an
annuity.
Important rules for Roth IRAs
- Contributions for any tax year must be made by April 15 of the following
calendar year, or before you file your tax return, whichever comes first.
- Contributions can be made by individuals of any age who have earned income.
- Contributions can be made for non-wage-earning spouses of up to $3,000
per year.
- Unlike Traditional IRAs, there is no age at which distributions are required with Roth IRAs.
Special withdrawal provisions with Roth IRAs
With a Roth IRA, all contributions can be withdrawn tax-free. But the special benefit is that, if holding period requirements are met, all earnings can be withdrawn on a tax-free basis as well.
The Roth IRA must be held for five years before the earnings are eligible for a tax-free withdrawal. The first year a contribution is made is considered to be the start of the five-year period. This holding period rule applies even if the withdrawals are made after reaching age 59 1/2.
Along with the five-year holding period, one of the following requirements must be met to qualify for tax-free withdrawal of earnings:
- Distribution made after age 59 1/2
- The death or disability of the account holder
- The money is used for a first home purchase (up to $10,000).
Taxable withdrawals can be made without penalty for a variety of purposes, including paying certain medical expenses and to pay for qualifying higher education expenses.
Start on your path today
To take a step towards a comfortable retirement, please contact your Protective representative today.
