Roth IRA

One of the more high profile changes brought on by the Taxpayer Relief Act of 1997 was the Roth IRA, introduced by Republican Senator William Roth Jr. from Delaware. With a Roth IRA, your earnings compound without annual taxation and, when you retire, withdrawals are tax-free.

The Roth IRA has had the following features: (check with www.irs.gov and your tax advisor for current and complete information)

  • Roth IRA contributions are not tax deductible.
  • You can contribute up to $5,500 a year to a Roth. ($6,500 if you’re 50 or older by the end of the year)
  • You can only open a Roth if you earn less than $131,000 ($193,000 for joint filers).
  • After you’ve owned your Roth IRA account for 5 years or more, you may take out money for certain qualified expenses without having to pay an early withdrawal penalty.
  • Qualified expenses include buying a first home; paying for qualifying medical expenses, health insurance premiums, and disability costs, college costs, and passing the age of 59½.
  • You are not required to begin taking contributions at age 70½.
  • You can continue contributing up to $6,500 per year of earned income past age 70½.
  • You can withdraw contributions tax-free at any time, however your earnings may have to stay in until you’re 59½ and have satisfied the five-year requirement.

You might consider a Roth IRA if:

  • You do not need your funds for at least 5 years.You want to work and contribute income to your account past age 70½.
  • You anticipate needing your money for a qualified reason before age 59½.
  • You expect to be in a high tax bracket during retirement.
  • You’re looking to build a tax-free inheritance for your heirs.
  • You’ve never before qualified for tax deductions on regular IRA contributions.
canadian pharmacy canadarxon.com