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What's Up With the Roth IRA?

So what’s the hype around the Roth IRA? If you follow the rules, the value of your account will grow tax-deferred and the distribution of your money will be tax free! That’s right, tax free! Do you have a problem with that? We didn’t think so. No one we know wants to pay Uncle Sam anymore than necessary, yet many people do not have Roth IRAs. Keep these rules in mind, then ask your consultant whether a Roth IRA is right for you.
bullet1st: If you are single making $95,000 AGI (adjusted gross income) or less, the Roth IRA account may fit nicely into your financial plans. If you file jointly and together you make $150,000 AGI or less, you will want to consider fully funding this account.
bullet2nd: You can contribute up to $2,000 or 100% of your earned income (whichever is less) if you meet the income requirements. Unlike the Traditional IRA, you can disburse the money you’ve contributed (not the earnings) at any time without penalty. Earnings are not to be disbursed before age 59 1/2 unless you are unable to earn an income due to a disability; you are using the money for a down payment on your first home; or you are using the money for legitimate higher education purposes (you will avoid the penalty, but you will be taxed).
bullet3rd: You can fund your account with cash, mutual funds, stocks, bonds, etc. Often people will go from bank to bank, institution to institution comparing returns on Roth IRAs. If you are investing for growth (stocks or stock mutual funds), you cannot compare the future returns of one account against another because there is no guarantee what your returns will amount to.
bullet4th: If you are thinking about converting your Traditional IRA to a Roth IRA, consider your present tax bracket and your ability to pay the taxed owed on the conversion from money outside your account.

There are a few other rules that are best discussed with your particular financial situation in mind. We encourage you to learn more about the Roth IRA before deciding that it’s not anything you need. Given that most people in the U.S. make less than $95,000 AGI, there is a chance that this account might be right for you.


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