Navigating a clear course toward your financial security.

Roth IRA - Retirement Planning

Roth Individual Retirement Account

Major Advantages of a Roth IRA

  • All Roth IRA withdrawals are tax-free
  • Required Minimum Distributions at age 70½ do not apply to Roth IRAs

Major Disadvantages of a Roth IRA

  • The Roth IRA legislation is unprecedented, thereby requiring careful review before utilizing a Roth IRA
  • Each person’s unique situation must be evaluated before opting to implement a Roth IRA

Making Current Contributions

  • $5,000 maximum in 2010
  • Workers over 50 years old may contribute an additional $1000
  • No tax deduction for contribution
  • Married - For 2010, Modified Adjusted Gross Income (MAGI) must be less than $176,000, and allowable contributions are reduced for MAGIs over $167,000
  • Single - For 2010, MAGI must be less than $120,000, and allowable contributions are reduced for MAGIs over $105,000

Holding Period Required Before Withdrawal

  • Account must be held for 5 years
  • Like traditional IRAs, owner must be age 59½

Converting a Traditional IRA to a Roth IRA

  • Adjusted Gross Income must be less than $100,000 (not counting the conversion) 
  • Must pay ordinary income taxes on the amount converted (less basis, if any, from Form 8606) 
  • In 2010, the modified adjusted gross income limitation of $100,000 is eliminated and the income taxes associated with the conversion may be paid over two years (2011 and 2012).

Roth IRA Conversion Risks

Congress could change the tax laws by imposing a threshold above which Roth IRA distributions could not be withdrawn tax-free, or imposing a modest tax on all Roth IRA distributions. For example, Social Security was originally not taxed at all. Now, depending on Adjusted Gross Income, a percentage of Social Security may be taxed at ordinary rates. 

Roth IRA Distribution

  • There is no required minimum distribution at age 70½
  • Beneficiaries can be changed after age 70½

Email your questions to

Secure Document Vault Don't email that document - Send confidential data to us with confidence using our secure document portal.