Named after Senate Finance Committee Chairman William V. Roth Jr., R-Del., the Roth
IRA is a new version of non tax deductible IRA. You don't get the tax deduction
with a Roth IRA when you
contribute the money, but after a five (5) year holding period you can withdraw it
tax free upon reaching age 59˝, or in case of disability, death or first-time home
purchase. This is a major tax savings tool.You can make
non tax deductible annual
contributions of up to $5,000 ($6,000 if age 50 or over) to a Roth IRA. You can continue to make non
tax deductible contributions to a Roth IRA after
age 70˝ and there are no minimum distribution requirements.
Roth IRAs could make contributions to some employer plans less
attractive because amounts contributed to and earned in employer plans are only tax
deferred, while amounts in the Roth IRA are tax free.
There are several options to consider with a Roth IRA. One concerns converting or
"rolling over" your existing IRA into a Roth IRA account. Be prepared to pay
income tax when you convert it, but lawmakers waived the usual 10 percent penalty tax
for early withdrawals from an IRA. A separate Modified Adjusted Gross Income
limit of $100,000 applies to people
who roll over their regular IRA to a Roth IRA.
Roth IRA
Distributions
Distributions from a Roth IRA are qualified and thus tax free if they are made after
the five (5) year holding period and for any of the following reasons: