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ROTH IRA
Unlike the traditional IRA, the Roth
IRA contributions are not tax deductible, the participant is investing “after tax
dollars”.
Whether the Participant may qualify
to contribute is based on participants AGI (Adjusted Gross Income) for the year
of the contribution. The participant can make contributions to a Roth IRA even if
it or the spouse is already part of an employer sponsored retirement plan. Roth
IRAs can receive rollover contributions from both other Roth IRAs and Traditional
IRAs. However, rollovers from traditional IRAs generally trigger Federal Income
taxes as if no rollover occurred.
Qualified distributions from a Roth
IRA are tax free providing the distribution is made after five tax year periods
beginning with the first tax year from which the individual made a contribution
to a Roth IRA and after the individual becomes 59½ years old or after the death
of the individual.
Also withdrawals are permitted before 59½ for the following exceptions:
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On account of the individual becoming disabled
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Maximum $10,000 distribution for first time home buying.
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Qualified higher education expenses
The individual may contribute to
both Roth and Traditional IRA’s as long as the combined contributions don’t exceed
$4,000 or $4,500 if over age 50. The Roth IRA doesn’t have a required beginning
date for withdrawals like the Traditional IRA has at age 70½, allowing for a longer
accumulation period and gives more tax planning flexibility.
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