What is a Roth IRA?
With a Roth IRA, contributions are not tax-deductible, but all distributions from the IRA are tax-free. In fact, with a Roth IRA, you can take qualified tax-free distributions as soon as five years after your first contribution. Qualified distributions include those:
- For first-time home buyer expenses, up to $10,000
- After reaching age 59 1/2
- In the event of death or disability
And, with the Roth IRA, you no longer have to take a minimum distribution when you reach age 70 1/2.
Singles earning less than $95,000 per year, or couples earning less than $150,000 annually, can contribute up to $5,000 per year (including contributions to other IRAs); those contributions phase out at higher income levels.
To enable older participants to “catch up” with their retirement savings, individuals 50 and older can contribute $6,000 per year.
Is the Roth IRA right for you? Should you roll your existing IRAs into Roth IRAs? As a general rule, the Roth IRAs’ tax-deferred compounding benefits younger workers most, but ask your tax advisor for advice about your specific situation.
To find out more about the IRA options that are right for you, give us a call at 1-888-4WESCOM (1-888-493-7266).