Special Issues for Retirement Plans - Roth IRAs
Roth IRAs have a very different tax structure than Traditional IRAs. Contributions are not deductible. However, earnings may be withdrawn tax-free (rather than tax-deferred) if the following conditions are met:
- Withdrawals do not occur until the account has been open at least five years
- Withdrawals do not occur until the Roth IRA owner reaches age 59 ½
|Filing Status||Full Contribution||Partial Contribution|
|Single or Head of Household||Up to $95,000||$95,001-$109,999|
|Married Filing Jointly||Up to $150,000||$150,001-$159,999|
The following information applies to Roth IRAs only:
- Contributions are permitted after age 70 ½ (assuming there is earned income).
- There are no mandatory minimum required distribution rules at any age.
- Withdrawals are made on a FIFO basis (first in, first out) - so any withdrawals made come from contributions first. Therefore, no earnings are considered withdrawn until all contributions have been withdrawn.
- Withdrawals of contributions are neither taxable nor penalized - even if they are made before age 59 ½ or before the account has been open for five years.
- Withdrawals of earnings are taxed but not penalized under the same exceptions listed for Traditional IRAs.
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