Wednesday, March 10, 2010

Roth IRA - Fast Facts for 2010

Many Financial Advisors will agree, the Roth IRA may be the single best retirement vehicle available to the individual investor. Here are the facts:

Key Features:
  • Qualified withdrawals of earnings are tax free.
  • Contributions can be withdrawn @ any time.
  • Contributions are permitted after age 70 1/2.

Roth IRA's may be Suitable for:

  • Individuals who do not qualify for Traditional IRA accounts.
  • Individuals who anticipate being in a higher tax bracket @ retirement.
  • Individuals who plan on leaving an inheritance (stretch IRA).
  • Individuals who need the ability to withdraw contributions @ any time.
  • Individuals who do not want to be mandated by IRS required minimum distribution rules (RMD). The Roth does not have to be distributed by age 70 1/2.
  • Individuals who simply want to compliment their existing retirement savings with a more flexible investment vehicle.

Tax Year Contribution Limits (2010):

  • Lessor of $5,000 or 100% of earned income.
  • Participants age 50 and older may contribute an additional $1,000.
  • Contributions are not tax deductible.

Eligibility Requirements (2010):

For individuals filing as an individual:

  • Full contribution allowed for owners with Modified Adjusted Gross Income (MAGI) of less than $105,000.
  • Partial, phased-out contributions for MAGI between $105,000 and $120,000.

For account owners filing jointly:

  • Full contribution if MAGI is less than $167,000.
  • Partial, phased-out contributions for MAGI between $167,000 and $177,000.

Distribution Requirements:

  • Distributions are tax and penalty free after account owner reaches age 59 1/2 or the account has been open five years, whichever comes later.
  • Early withdrawal penalties of 10% may be waived for certain qualified expenses.

Contribution Deadline (2010):

  • April 15, 2011.
  • Extensions may be granted for the Armed Forces. Please see the Armed Forces Tax Guide for more details @

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