BOSTON (CBS) – With a Roth IRA you use after-tax dollars to make your contribution, but when you withdraw the funds in retirement you will not owe income tax on the withdrawals including the money the Roth has earned. You must have earned income to contribute to a Roth IRA, and if you’re working you can continue to contribute past age 70½.
There are some other rules. Withdrawals from the account will be free of income taxes if the owner has held the Roth IRA for at least five years and has attained the age of 59½. With a Roth IRA you are always permitted to get at your contributions without a penalty because you have already paid taxes on them.
The minimum distribution rules do not apply to the Roth IRA and funds can stay in the account past the owner reaching age 70½.
A word of caution, in the new federal budget there is some language that just might require minimum distributions for Roth IRAs in the very near future.
As with all good things, there are limitations. Contributions are phased out for single taxpayers if your adjusted gross income (AGI) is between $114,000 and $129,000 and for married couples filing jointly with an AGI between $181,000 and goes away at $191,000.
A Roth IRA can be a good choice for retirement savings. The younger you are, the sweeter the deal. A 25-year-old may not be able to use the deduction for a retirement plan contribution but tax-free income 40 years from now in retirement will be a bonus.
You can also convert a regular IRA to a Roth IRA. The proceeds of your IRA will be taxable in the year you make the conversion and there will not be a 10% penalty due if you are under age 59½.
On Saturday May 17th Dee will be the keynote speaker at The Money Conference which is a FREE one-day event presented by The Office of Massachusetts State Treasury and the Massachusetts Financial Literacy Trust Fund, in conjunction with local cities and community partners to help households build their financial knowledge and improve their financial behavior through quality financial education.
Saturday May 17, 2014
8:30 am – 3:00 pm
Everett High School
100 Elm Street
Everett, MA 02149
Questions? Contact Sheila O’Loughlin at (617) 367-6900.
Do you feel your need for financial education and empowerment is urgent? You are not alone! Americans are saving less, spending more and carrying credit card debt over from month-to-month, suggesting that the painful financial lessons of the recent past may quickly be forgotten.