Roth IRAs

A Tax-Free Source of Retirement Income

Americans are looking for new ways to secure their financial future.  The Roth IRA gives you the options to invest after-tax dollars today, let the investment grow tax deferred, and take qualifying withdrawals tax free.

What makes the Roth IRA unique?

Unlike any other type of IRAs, the Roth IRA can provide you with tax-free income during your retirement.  Your money going into the Roth IRA is taxed; your money later withdrawn, which may potentially include significant amounts of earnings, is tax-free if your follow certain requirements.

Two factors make this possible:

  • First, the money you contribute to a Roth IRA has already been taxed.  Therefore, the principal amount is never subject to taxes or penalties in the future, as long as you stay within the contribution guidelines.
  • Second, this retirement savings vehicle allows the money you contribute to grow tax-deferred.  If you do not withdraw any of the earnings until you have had a Roth IRA for at least five years, and you satisfy one of four qualifying events, those tax-deferred earnings become tax-free.  (Consult your tax advisor for eligibility.)

What are the qualifying conditions and events?

If you satisfy two conditions, you may take tax-free and penalty-free withdrawals from your Roth IRA.  First, a Roth IRA must have been open for a minimum of five years.  Second, the withdrawal must be made after one of the following events occurs:

  • Attaining age 59 1/2
  • Incurring a disability
  • Incurring first-time homebuyer expenses
  • Death

Distributions that meet the above requirements are referred to as "qualified" distributions. While you may take distributions from your Roth IRA at any time, distributions that are not qualified are subject to taxes (and in some cases early distribution penalties) to the extent they exceed your aggregate contributions to Roth IRAs.

Who is Eligible?

There is no 70 1/2 age limit on making contributions.  However, there is income restrictions and limitations.

What is the maximum contribution amount?

If you are eligible, the maximum amount to contribute per year is $5,500 for 2014. In addition, if you reach age 50 or older by the close of the taxable year, you may also make a catch-up contribution up to $1,000.

For more information about the benefits of a Roth IRA, please call our Customer Service Center at 816-795-9933.