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Retirement Planning
Roth IRA

The ROTH-IRA allows investors a newer option regarding retirement planning. As with a traditional IRA, you won't pay taxes on any earnings in your account while they remain there. But unlike a Traditional IRA, contributions are made on an after-tax basis.

You can open a ROTH IRA if you earn income from wages or salary of at least $2,000 per year. However, income limits apply:

  • Single Filers: AGI must be less than $95,000

  • Married Couples: AGI must be less than $150,000. (You qualified for a partial contribution if you are married and your AGI is between $110,000 and $160,000.

To determine your contribution for the year, you have to reduce each spouse's otherwise allowable ROTH IRA contribution limit of $4,000 by 13¢ for every dollar of Modified AGI between $110,000 and $160,000 )

Individuals over the age of 50 may be eligible for a $500 annual "catch-up" contribution.

Your maximum IRA contribution per year can be $4,000 or 100% of earned income, whichever is less. Please note your contributions to all IRAs cannot exceed $4,000.

Your contributions are NOT tax-deductible. Regardless of whether or not you are an active participant in an employer's retirement plan, Roth IRA contributions are never tax-deductible.

Tax Benefits

  • Your contributions grow tax-free over the life of your account.

  • There are not up-front tax savings for any contributions.

  • Upon death, your beneficiaries will receive the proceeds of the account without having to pay any tax, as long as the account has been open for five years


  • Distributions don't have to begin at age 70 1/2.

  • Generally, you can withdraw your Roth IRA contributions tax-free and penalty-free if your account has been open for more than five years and you are at least 59 1/2 years of age.

  • If you take a distribution of earnings before reaching 59 1/2 (Early Withdrawals), you will owe both the tax due and a 10% early withdrawal penalty.

Other reasons that you can withdraw money from your account:

  • Tax-free and penalty-free for the purchaser of a first home (Up to $10,000).

  • You can make penalty-free withdrawals for qualified higher education costs (for yourself, your spouse, children or grandchildren). Generally, ordinary income-tax rates would apply to the taxable portion of the withdrawal amount.

  • Death or Disability. If the account is less than five years old, you will owe taxes on earnings, not on original contribution. In addition, you will owe the 10% penalty on early distribution. On the other hand, if the account is older than five years old, no taxes or penalties will be owed.

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