August 20, 2019
Roth Individual Retirement Accounts (IRAs)
What Is A Roth IRA?
An individual retirement account, commonly known as an IRA, is a trust (think of it as an investment account) created for your retirement. It allows you to withdraw money from it tax-free.
In 2019, the contributions limit is $6,000 per taxpayer. You may contribute an additional $1,000 if you are age 50 or over.
Similarities To The Traditional IRA
- When the account is five years old and the taxpayer attains age 59-and-a-half, he or she can take tax-free distributions as needed.
- Any taxpayer who has Earned Income and Modified Adjusted Gross Income (MAGI) less than the legal requirements can contribute.
- If an individual is also contributing to a retirement plan with an employer, contributions to a Roth IRA are allowed.
- Rules for one’s spouse contributing are the same.
- There’s a ten percent penalty for early withdrawal
Differences When Compared To The Traditional IRA
- Unlike its cousin, the Traditional IRA, contributions to a Roth IRA are not tax-deductible, but if the rules are followed, distributions are tax-free.
- There are no minimum distribution requirements for the original account owner and spouse.
- Savings are passed on tax-free to beneficiaries when the account holder dies.
- After age 70-and-a-half there are no contribution restrictions, provided there is earned income.
- If an account holder dies and his or her spouse is the beneficiary, the spouse will be considered the account owner. All other beneficiaries are required to take distributions from inherited Roth IRAs over their life expectancies or distribute the entire balance within five years.
Have more questions about Roth IRAs? Contact our offices by calling 1-305-363-5429 or by emailing me at robert@robertclark-cpa.com. You can also reach our experts via an easy-to-use online form.
