| ROTH IRA | ||
|---|---|---|
| Eligibility: | Single filers: MAGI < $110,000 | |
| Joint filers: MAGI < $160,000 | ||
| Contribution Tax Limit Year 2011-2012: |
Lesser of $5,000 or 100% of earned income. | |
| Contributions are non-deductible | ||
| Participants age 50 and older may contribute an additional $1000 | ||
| Suitable For: | Clients that do not quality for IRA tax-deduction | |
| Clients that expect to be in a higher tax bracket at retirement | ||
| Non-employed spouses who file a joint return | ||
| Features: | Tax-free treatment on qualified withdrawals | |
| Contributions permitted after age 70.5 | ||
| No required minimum distributions at age 70.5 | ||
ADVANTAGES:
- Any earnings growth tax-free provided certain requirements are met.
- Catch up provisions: Stating in year 2002, investors who are age 50 or more can make "catch up" contributions to accelerate the accumulation of assets in their IRA's.
- New tax legislation set new contribution limits as follows:
- Year 2011-2012 - $5,000 annual contribution
- No minimum required distributions.
- Qualified distributions are tax-free and penalty-free upon completion of the following:
- You attain age 59 ½.
- Completion of the five-year holding period.
- Qualified first-time home purchase expenses.
- Death or disability
This is a good supplementary contribution vehicle for highly compensated employees who have reached their contribution limits in the 401(k) plan.