Contribute to a Secure Retirement with a Roth IRA

Individuals interested in tax advantages may find Roth Individual Retirement Annuities (Roth IRAs)1 a good fit for their retirement saving goals. To open a Roth IRA, one must meet certain earned income criteria set by the Internal Revenue Service.

Although Roth IRAs and Traditional IRAs have the same contribution limits, many people prefer the different distribution rules of Roth IRAs.

Roth IRA Advantages

Roth IRAs are similar to other IRA plans and feature the following advantages:

• No age restrictions exist for individuals making contributions to Roth IRAs, although your earned income must equal the contribution amount. Annual contribution amounts may vary according to your Modified Adjusted Gross Income (MAGI).
• Since contributions are made with after-tax money, they don’t receive an immediate benefit of income tax deduction. The benefit of avoiding income tax or IRS penalties occurs at the time of distribution for payments that meet qualified withdrawal criteria.
• Contributions – as opposed to earnings – can be withdrawn at any time without income tax or IRS penalties because the money has already been taxed2.

Qualified Withdrawal Criteria

To be considered a qualified withdrawal, the following guidelines must be met after the five-year period starting with the first taxable year for which a contribution is made and:

• Occur at age 59-1/2 or after,
• Occur due to a disability,
• Be paid to a beneficiary or your estate after your death, or
• Occur with a first-time home purchase (subject to a $10,000 lifetime maximum).