What Are The Basics Of A Roth IRA?

• The Roth IRA is a great way to save for retirement because earnings on your investments are free from federal income tax as long as certain conditions are met.

• Self-Directed Roth IRA contributions may be made even after you are 70½, and you are not required to take distributions.

• A Self-Directed Roth IRA holder may withdraw the principal amounts (your contributions) invested at any time without any tax liability.

• In order for the Roth IRA to qualify for the tax free treatment, two conditions must be met:

• Starting from the time you first open a Roth IRA, the account must be established for a minimum of five years.
• You must be 59 ½ or older.

Example 1:

If you open the Roth IRA when you are 58, you will have a fully tax free account when you are 63.

Example 2:

If you open the Roth IRA when you are 53, you will not have a fully tax free account until you are 59 ½.

Note: The above rules apply to conversions from a Traditional IRA to a Roth also.

How To Fund Your Self-Directed Roth IRA:

A Roth IRA may be funded with a contribution, rolling over from an existing Roth IRA, or by converting Traditional IRA funds to a Roth IRA. While converting from a Traditional to a Roth IRA is a taxable event, your earnings will grow tax free.

Contributions can be made yearly (see chart below for contribution limits). When considering a conversion from a Traditional IRA seek professional tax advice.

Why Consider a Self-Directed Roth IRA?

• You want tax-free earnings and no taxation on withdrawals.
• You are already saving for retirement with an employer-sponsored plan.
• Your income does not exceed the income limits for contributing (see below).
• You want to invest a retirement plan but may need to access your savings.
• You expect your tax rate during retirement to remain the same or to be at a higher level than your current tax rate.
• You want a plan with no required minimum distributions.
• You want a plan in which, with proper planning, the tax free compounding can reach 100 years with your heirs included.

Please consult your tax professional for the plan that best suits your individual needs.

Are You Eligible To Open A Roth IRA?

You can contribute to a Self-Directed Roth IRA if you have taxable income and your modified adjusted gross income is less than:

Married Individuals Filing Jointly:

• $194,000 for 2016
• $196,000 for 2017

Single or Head of Household:

• $132,000 for 2016
• $133,000 for 2017

Married Filing Separate Returns:

• $10,000 for 2016
• $10,000 for 2017

Spousal IRA:

Note: If you have a non-working spouse they are eligible to open a Roth IRA using the household income and they can make contributions based on the above charts.