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Roth IRA Rates, News and Article

Roth IRA also known as a Traditional Roth

Some differences from a traditional IRA and a Roth

In contrast to a traditional IRA, contributions to a Roth IRA are not tax-deductible. Withdrawals are generally tax-free, but not always and not without certain stipulations they are tax free when the account has been opened for at minimum of 5 years for principal withdrawals and the owner’s age is at least 59 ½ for withdrawals on the growth portion above principal. An advantage of the Roth IRA over a traditional IRA is that there are fewer withdrawal restrictions and requirements.

Roth IRA News:

"Roth IRA" - Google News
2020 Google Inc.

A Roth IRA may help fund your home purchase. Here are the pros and cons - CNBC
How To Buy a Roth IRA When You Make Too Much To Qualify For One - Kiplinger's Personal Finance
Don't Go through a Second Market Crash Without This Stock in Your IRA - Motley Fool
6 potential pitfalls of Roth IRA Conversions - USA TODAY
What Is A Backdoor Roth? - Forbes
A Market Crash Could Be Looming: How a Roth IRA Conversion Can Save You Money - Daily Journal Online
Isolating IRA basis for more tax efficient Roth IRA conversions - Financial Planning
4 Things to Do Before Contributing to a Roth IRA - The Motley Fool
Need cash? Read this before you take an early Roth IRA withdrawal during the pandemic - MarketWatch
How a Roth IRA Could Help You Keep More of Your Social Security Benefits - The Motley Fool
Roth IRA Withdrawal - Motley Fool
Sponsor spotlight: What every Roth IRA account holder should know about tax-free withdrawal options - My Edmonds News
Taxing Thoughts - What every Roth IRA account holder should know - The Cherokeean Herald
Why 2020 Should Be Your Year To Consider The Roth IRA Conversion - Forbes
When can I close my Roth IRA? - MarketWatch
Will this strategy help my Roth IRA conversion be tax-free? - NJ.com
5 Times You Can Get Into Your IRA Early—Without Penalty - Forbes
I want to transfer my 401(k) to a Roth IRA. Are there downsides? - NJ.com
Biden calls for an overhaul of 401(k) tax breaks. What it means for you - CNBC
Dear Penny: Should I use my savings or Roth IRA to buy first home? - Tampa Bay Times
If you have to withdraw money from a retirement account, your Roth IRA should be your absolute last resort - Business Insider
How to Roll Over Your 401(k) to an IRA – Forbes Advisor - Forbes
This lesser-known retirement savings tool is loaded with tax benefits - AZCentral.com
Dave Ramsey says: Talk with adviser before withdrawing from Roth IRA - KTAR.com
Roth 401(k) or traditional (401k)? - Lowell Sun
Oregon Cannabis Companies are Fast Approaching Final Deadline to Enroll Employees in OregonSaves - Lexology
What Is a Roth IRA Conversion? - Motley Fool
Can I Withdraw Funds From My Retirement Account During COVID-19? - JD Supra
If you're saving for retirement and are in your 50s, it may be time to reassess your plan - CNBC
Wiemann: Reaching Retirement – Now What? - Los Alamos Daily Post
4 steps for building generational wealth | Local News Stories - Williston Daily Herald
Orleans Parish property transfers, Aug. 24-29, 2020: See a list of home and other sales - NOLA.com
What Is a Roth IRA? - Forbes
Most Americans are behind on their retirement savings—here are some tips to catch up - CNBC
Why Did the Bidens Pay Taxes on Their Social Security Benefits? - Press of Atlantic City
Where IRAs Stand in Retirement Saving - ASPPA Net
I'm a financial planner, and 3 lessons I've learned from other planners changed the way I do my job - Business Insider
Money Matters: The Roth IRA 5-year rule - WMUR Manchester
A killer tax break could be yours this year if you make this 1 move - Fox Business
All about the Roth IRA - MarketWatch
You may be able to use your Roth IRA to fund a home purchase. Here are the pros and cons - CNBC
I want to take money out of my Roth IRA tax-free — when can I do that? - MarketWatch
What You Need To Know About A Roth IRA Now - Forbes
The biggest things you probably don't know about Roth IRAs - CNBC
How to find out if a Roth conversion is right for you—and how to do one - CNBC
You have until April 15 to save in a Roth IRA. Here's why you should - CNBC
Contributing to a Roth IRA in a Low-Income Year - U.S News & World Report Money
A Roth IRA is a tax-advantaged way to save for retirement that most working people can use - Business Insider
Where to invest first: Roth IRA or a taxable brokerage account - CNBC
Why the Pandemic Should Change Your Roth IRA Strategy - Statesville Record & Landmark
The Backdoor Roth IRA Is Better Than Ever Right Now - The Motley Fool
5 Roth IRA Rules You Must Know Before Opening An Account - Forbes
Roth IRAs are complicated, but often worth it - Albuquerque Journal
Not knowing these Roth IRA truths can cost you - CNBC
Roth IRAs Popular Among Younger Retirement Savers - PLANSPONSOR
This 28-year-old lives on $227,000 a year in London—here’s how she spends her money - CNBC
You only have a few days left to make 2019 contributions to your IRA—here's what you should know - CNBC
Roth IRA Income Limits for 2020 - Yahoo Finance
Here's why a Roth IRA conversion can make sense in this down market - CNBC
How to decide if you should invest in a 401(k), Roth 401(k), IRA or Roth IRA - MarketWatch
Why I max out my Roth IRA every year, no matter what it takes - Business Insider
Millennials are racking up retirement savings in Roth IRAs - The Washington Post
It’s Prime Time for Roth IRA Conversions. Here’s How to Do Them. - Barron's
3 ways the downturn could help you build tax-free retirement savings - CNBC
COVID-19 crisis creates a perfect opportunity for Roth IRA conversions - MarketWatch
What is a Roth IRA? It's a tax-advantaged retirement account ideal for young professionals - Business Insider
Commentary: This may be time for a Roth IRA conversion - nwitimes.com
Roth retirement plan or traditional IRA and 401(k) plans? Is this the time to adjust your thinking? - That’s - cleveland.com
Future Returns: Why a Roth IRA Conversion May or May Not Make Sense Now - Barron's
Manitowoc investment adviser: Why now may be the time for a Roth IRA conversion - Herald Times Reporter
If coronavirus has cut your income, here’s how a Roth IRA could be used to get emergency cash - Bankrate.com
Is a Roth IRA right for you? - Fox Business
Down Market? It’s Roth Time! - Forbes
Advantages of Roth IRA Conversions in 2020 - Williamson Source
Here's how Roth IRA conversions can deliver some lucrative hidden benefits - CNBC
When does it make sense to convert traditional IRA to Roth? - Minneapolis Star Tribune
Three New Reasons To Consider Roth IRA Conversion After COVID-19 - Forbes
Why a Roth IRA May Be Right For You - FedSmith.com
Hidden Costs of Roth IRA Conversions - Kiplinger's Personal Finance
Here are the hidden benefits of a Roth IRA conversion - CNBC
Is a Roth IRA Better Than a Traditional IRA? - ActionNewsJax.com
Roth IRA conversions are more attractive than ever thanks to the SECURE Act - Bankrate.com
Roth IRA withdrawals, coronavirus-related distributions and other cash options for clients - Financial Planning
Ready for Roth? Why Now May Be the Time to Do a Roth Conversion - The Ticker Tape
One Smart Move: A bear market is the best time to ‘convert’ to a Roth IRA. Here’s why - Fortune
As advisers worry COVID-19 might send taxes up, retirement funds rush to Roth IRAs - Pittsburgh Post-Gazette
BUSH: Opening 'backdoor' Roth IRAs - Valdosta Daily Times
If your company offers a 401(k), does it make sense to have a Roth IRA, too? - CNBC
Starting a Roth IRA for a Teenager | Community - Fallon County Extra
Why 2020 Is an 'Unprecedented Opportunity' for a Roth IRA Conversion - Kiplinger's Personal Finance
I’m so confused: How do I treat withdrawals from a Roth IRA? - MarketWatch
Untangling Roth Contribution Rules for 2019 Returns - FEDweek
Demystifying backdoor Roth conversions | Julie Jason - Index-Journal
3 Reasons to Pick a Roth IRA Over Other Retirement Accounts - The Motley Fool
Financial Freedom: Learn the power of a Roth IRA - Newport News Times
A silver lining in the stock market’s collapse: A smaller tax bill for Roth IRA conversions - MarketWatch
The 5-Year Rules Every Roth IRA Investor Must Understand - The Motley Fool
Want to Do a Free Roth IRA Conversion and Be Charitable? Here’s How. - Barron's
YOUR MONEY: Is now a good time to consider a Roth conversion? - Milford Daily News
Why You Need a Roth IRA - Yahoo Finance

Advantages

  • Direct contributions to a Roth IRA may be withdrawn tax free at any time. Rollover, converted (before age 59½) contributions held in a Roth IRA may be withdrawn tax and penalty free after the “seasoning” period (currently 5 years). Earnings may be withdrawn tax and penalty free after the seasoning period and age 59½ (or other qualifying event). All withdrawals from a traditional IRA are taxed as Ordinary Income, and a penalty applies for withdrawals before age 59½. In contrast, capital gains on stocks or other securities held in a regular taxable account for at least a year would be taxed at the lower long-term capital gain rate, which is currently 15%. This higher tax rate for withdrawals (and tax on the original contribution) from a traditional IRA is a quid pro quo for the deduction taken against ordinary income when putting money into the IRA.
  • If there is money in the Roth IRA due to conversion from a traditional IRA, the Roth IRA owner may withdraw up to the total of the converted amount without penalty, as long as the “seasoning” period (currently five years) has passed on the converted funds.
  • Direct contributions to a Roth IRA (i.e., not including rollovers) may be withdrawn at any time with no tax or penalty, since they have already been taxed.
  • Up to $10,000 in earnings withdrawals are considered qualified (tax-free) if the money is used to acquire a principal residence. This house must be acquired by the Roth IRA owner, their spouse, or their lineal ancestors and descendants. The owner or qualified relative who receives such a distribution must not have owned a home in the previous 24 months.
  • Contributions may be made to a Roth IRA even if the owner participates in a qualified retirement plan such as a 401(k). (Contributions may be made to a traditional IRA in this circumstance, but they may not be tax deductible.)
  • If a Roth IRA owner dies, and his/her spouse becomes the sole beneficiary of that Roth IRA while also owning a separate Roth IRA, the spouse is permitted to combine the two Roth IRAs into a single account without penalty.
  • If the Roth IRA owner expects that the tax rate applicable to withdrawals from a traditional IRA in retirement will be higher than the tax rate applicable to the funds earned to make the Roth IRA contributions before retirement, then there may be a tax advantage to making contributions to a Roth IRA over a traditional IRA or similar vehicle while working. There is no current tax deduction, but money going into the Roth IRA is taxed at the taxpayer’s current marginal tax rate, and will not be taxed at the expected higher future effective tax rate when it comes out of the Roth IRA.
  • Assets in the Roth IRA can be passed on to heirs, unlike Social Security.
  • The Roth IRA does not require distributions based on age. All other tax-deferred retirement plans, including the related Roth 401(k), require withdrawals to begin by April 1 of the calendar year after the owner reaches age 70½, If you don’t need the money and want to leave it to your heirs, this is a great way to accumulate income tax free. Beneficiaries who inherited Roth IRAs are subject to the minimum distribution rules.
  • Since a Roth contribution has already been taxed, it may be equivalent to a larger contribution to a traditional IRA that will be taxed upon withdrawal. For example, a contribution of the 2008 limit of $5,000 to a Roth IRA may be equivalent to a traditional IRA contribution of $6667 (assuming a 25% tax bracket at both contribution and withdrawal). In 2008 you cannot contribute $6667 to a traditional IRA due to the contribution limit, so the post-tax Roth contribution may be larger. However, many people end up in a lower tax bracket in retirement, or, the effective tax rate applicable to their traditional IRA withdrawals in retirement will be equal to or lower than their marginal tax rate while working, and they will not realize as much of this benefit. Regardless of whether marginal tax rates increase or decrease, Roth IRA earnings are not taxed, if you follow the rules.
  • On estates large enough to be subject to estate taxes, a Roth IRA can reduce estate taxes since tax dollars have already been subtracted. A traditional IRA is valued at the pre-tax level for estate tax purposes.

Major disadvantages

  • Contributions to a Roth IRA are not tax deductible. By contrast, contributions to a traditional IRA are tax deductible (within income limits). Therefore, someone who contributes to a traditional IRA instead of a Roth IRA gets an immediate tax savings equal to the amount of the contribution multiplied by their marginal tax rate while someone who contributes to a Roth IRA does not realize this immediate tax reduction. Also, by contrast, contributions to most employer sponsored retirement plans (such as a 401(k), 403(b), SIMPLE IRA or SEP IRA) are tax deductible with no income limits because they reduce a taxpayer’s adjusted gross income.
  • Eligibility to contribute to a Roth IRA phases out at certain income limits. By contrast, contributions to most tax deductible employer sponsored retirement plans have no income limit.
  • Contributions to a Roth IRA do not reduce a taxpayer’s adjusted gross income (AGI). By contrast, contributions to a traditional IRA or most employer sponsored retirement plans reduce a taxpayer’s AGI. One of the key benefits of reducing one’s AGI (aside from the obvious benefit of reducing taxable income) is that a taxpayer who is close to the threshold income of qualifying for some tax credits or tax deductions may be able to reduce their AGI below the threshold at which he or she may become eligible to claim certain tax credits or tax deductions that may otherwise be phased out at the higher AGI had the taxpayer instead contributed to a Roth IRA. Likewise, the amount of those tax credits or tax deductions may be increased as the taxpayer slides down the phaseout scale. Examples include the child tax credit, or the earned income credit, or the student loan interest deduction.
  • A taxpayer who chooses to make a Roth IRA contribution (instead of a traditional IRA contribution or tax deductible retirement account contribution) while in a moderate or high tax bracket will likely pay more income taxes on the earnings used to make the Roth IRA contribution as compared to the income taxes that would have been due to be paid on the funds that would have been later withdrawn from the traditional IRA, had the taxpayer made a traditional IRA contribution. This is because contributions to traditional IRAs or employer sponsored tax deductible retirement plans result in an immediate tax savings equal to the taxpayer’s current marginal tax bracket multiplied by the amount of the contribution. It has been shown that many people have a lower income in retirement than during their working years, and thus end up in a lower tax bracket in retirement, and this is another reason why withdrawals from a traditional IRA or tax deferred retirement plan in retirement are likely to result in a lower tax bill. The higher the taxpayer’s marginal tax rate, the greater the disadvantage.
  • A taxpayer who pays state income taxes and who contributes to a Roth IRA (instead of a traditional IRA or a tax deductible employer sponsored retirement plan) will have to pay state income taxes on the amount contributed to the Roth IRA in the year the money is earned. However, if the taxpayer retires to a state with a lower income tax rate, or no income taxes, then the taxpayer will have given up the opportunity to avoid paying state income taxes altogether on the amount of the Roth IRA contribution by instead contributing to a traditional IRA or a tax deductible employer sponsored retirement plan, because when the contributions are withdrawn from the traditional IRA or tax deductible plan in retirement, the taxpayer will then be a resident of the low or no income tax state, and will have avoided paying the state income tax altogether as a result of moving to a different state before the income tax became due.
  • The perceived tax benefit may never be realized, i.e., one might not live to retirement or much beyond, in which case, the tax structure of a Roth only serves to reduce an estate that may not have been subject to tax. One must live until one’s Roth IRA contributions have been withdrawn and exhausted to fully realize the tax benefit. Whereas, with a traditional IRA, tax might never be collected at all, i.e., if one dies prior to retirement with an estate below the tax threshold, or goes into retirement with income below the tax threshold (To benefit from this exemption, the beneficiary must be named in the appropriate IRA beneficiary form. A beneficiary inheriting the IRA solely through a will will not be eligible for the estate tax exemption. Additionally, the beneficiary will be subject to income tax unless the inheritance is a Roth IRA). Although heirs will have to pay taxes on withdrawals from traditional IRA accounts they inherit, and must continue to take mandatory distributions (although it will be based on their life expectancy). It is also possible that tax laws may change by the time one reaches retirement age.
  • Congress may change the rules that currently allow for tax free withdrawal of Roth IRA contributions. Therefore, someone who contributes to a traditional IRA is guaranteed to realize an immediate tax benefit, whereas someone who contributes to a Roth IRA must wait for a number of years before realizing the tax benefit, and that person assumes the risk that the rules will be changed during the interim.

Eligibility & Income limits

Congress has limited who can contribute to a Roth IRA based upon income. A taxpayer can only contribute the maximum amount listed at the top of the page if their Modified Adjusted Gross Income (MAGI) is below a certain level (the bottom of the range shown below). Otherwise, a phase-out of allowed contributions runs proportionally throughout the MAGI ranges shown below. Once MAGI hits the top of the range, no contribution is allowed at all, however a minimum of $200 may be contributed as long as MAGI is below the top of the range (e.g. A single 40 year old with MAGI $115,999 may still contribute $200 to a Roth IRA vs. $30). Excess Roth IRA contributions may be recharacterized into Traditional IRA contributions as long as the combined contributions do not exceed that tax year’s limit. The Roth IRA MAGI phase out ranges for 2008 are:

  • Single filers: Up to $101,000 (to qualify for a full contribution); $101,000-$116,000 (to be eligible for a partial contribution)
  • Joint filers: Up to $159,000 (to qualify for a full contribution); $159,000-$169,000 (to be eligible for a partial contribution)[Married filing separately (if the couple lived together for any part of the year): $0 (to qualify for a full contribution); $0-$10,000 (to be eligible for a partial contribution).

The lower number represents the point at which the taxpayer is no longer allowed to contribute the maximum yearly contribution. The upper number is the point as of which the taxpayer is no longer allowed to contribute at all. Note that people who are married and living together, but who file separately, are only allowed to contribute a relatively small amount.

However, once a Roth IRA is established, the balance in the account remains tax-sheltered, even if the taxpayer’s income rises above the threshold. (The thresholds are just for annual eligibility to contribute, not for eligibility to maintain an account.)

To be eligible, you must meet the earned income minimum requirement. In order to make a contribution, you must have taxable compensation (not taxable income from investments). If you make only $2000 in taxable compensation, your maximum IRA contribution is $2000.

Roth IRA

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