tailieunhanh - Lecture Employee benefits and retirement planning - Chapter 6: Roth IRA

This chapter provides an overview of the Roth IRA. Following the same format as the previous chapter, it first discusses what is the Roth IRA, when is it indicated, and advantages and disadvantages. Tax implications are covered, including contribution rules, distribution rules, and rollovers. Following a brief section on where to find out more, the chapter concludes with a question and answer section. | What is it? A form of IRA that accepts contributions (to certain limits) on a nondeductible basis provides tax free withdrawals (within certain limits) Copyright 2009, The National Underwriter Company When is it indicated? similar to traditional IRA, indicated when: want to defer taxes on investment income long-term accumulation, especially for retirement, is an important objective supplement or alternative to qualified retirement plan desired Copyright 2009, The National Underwriter Company When is it indicated? (cont) 2. Roth IRA is preferred to traditional IRA when the particular tax benefits under a Roth IRA are a better match for individual’s planning needs. Copyright 2009, The National Underwriter Company Advantages eligible individuals may contribute up to a specified limit annually withdrawals tax free if after 5 year wait and upon death or disability, first time home purchase, or after age 59½ Copyright 2009, The National Underwriter Company Advantages (cont) 3. Roth IRA contribution eligibility not restricted by active participation in employer’s retirement plan 4. Roth IRA contributions can be made after age 70½ 5. Roth IRAs not subject to required minimum distribution rules until death of owner Copyright 2009, The National Underwriter Company Disadvantages Roth IRA contributions limited each year; limit reduced if annual adjusted gross income exceeds certain thresholds early Roth IRA withdrawals in excess of contributions taxed in full and subject to 10% penalty Copyright 2009, The National Underwriter Company Tax Implications: Contribution Rules Contribution Limits maximum contribution is LESSER of the dollar limit or 100% of earned income LESS contributions to traditional deductible or nondeductible IRA Copyright 2009, The National Underwriter Company Maximum Annual Contribution Amount (2009) Type Dollar Limit Regular $5,000 Catchup (age 50 and older) $1,000 Copyright 2009, The National Underwriter Company Tax . | What is it? A form of IRA that accepts contributions (to certain limits) on a nondeductible basis provides tax free withdrawals (within certain limits) Copyright 2009, The National Underwriter Company When is it indicated? similar to traditional IRA, indicated when: want to defer taxes on investment income long-term accumulation, especially for retirement, is an important objective supplement or alternative to qualified retirement plan desired Copyright 2009, The National Underwriter Company When is it indicated? (cont) 2. Roth IRA is preferred to traditional IRA when the particular tax benefits under a Roth IRA are a better match for individual’s planning needs. Copyright 2009, The National Underwriter Company Advantages eligible individuals may contribute up to a specified limit annually withdrawals tax free if after 5 year wait and upon death or disability, first time home purchase, or after age 59½ Copyright 2009, The National Underwriter Company Advantages (cont)