| Discover the benefits of a Roth IRA. |
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What is a Roth IRA?
The Roth IRA is a non-deductible account that features tax-free withdrawals for certain distribution
reasons after a five-year holding period. |
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Am I eligible for a Roth IRA?
Basically, there are two requirements for eligibility to contribute to a Roth IRA: you must have earned income (or your spouse must have earned income) and your modified adjusted gross income (MAGI) cannot exceed certain limits. |
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How much can I contribute?
You may contribute any amount up to the lesser of 100% of your earned income or the maximum contribution amount, if your MAGI is within prescribed limits.*
It is important to note that the contribution limit is the aggregate amount that you can contribute to any Roth and/or traditional IRA in a given year. For example, in tax year 2008, if you contribute $3,000 to a traditional IRA you can only contribute $2,000 to a Roth IRA for that year. |
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Do I pay taxes on my earnings?
No (provided you take the earnings as part of a qualified distribution). That's the best part of the Roth IRA. Unlike the traditional IRA, you cannot take a tax deduction for any of the contributions that you make to a Roth IRA. However, when you're ready to take a withdrawal, you pay no taxes on any of the earnings that your money has generated. |
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What if I need access to my money now?
A helpful feature of the Roth IRA is that, for non-qualified distributions, original contribution amounts are returned first. Contributions (as opposed to earnings) are not subject to taxation or the 10% IRS premature-distribution penalty when distributed. In other words, you can always get back your principal tax free and IRS penalty free for any reason. |
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When do I have to start taking distributions from my Roth IRA?
You never have to take distributions from your Roth IRA. That's another benefit of the Roth IRA over traditional IRA's. Assets held in a Roth IRA are not subject to age 70½ required minimum distributions. |
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When is the contribution deadline for funding a Roth IRA?
Roth IRA's for the taxable year can be opened and funded any time between January 1 and the date your tax return is due for the year, excluding extensions. This is normally April 15 of the following year. |
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For more IRA information, email or call Chris Falzarano at (617) 394-3687.
Click here to find out about Traditional IRA's. |
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| The IRS has established income restrictions and contribution limits. A brochure including specific income restrictions and a contribution eligibility worksheet is available from Eagle Bank. Consult your tax advisor about your eligibility. Early withdrawal penalties from Certificates of Deposits would still apply. |
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