Demo | Enroll
Contributions to a Roth IRA are not deductible, but your investment earnings over the years can be tax-free. So when you begin to withdraw your earnings you will pay no additional tax. In other words, you get tax-free growth on compounded interest.
Who Is It For?
TRADITIONAL IRA: For individuals under age 70½ who have earned income.
Is It Tax-Deferred or Tax-Free?
TRADITIONAL IRA: A tax-deferred investment with a possible tax deduction if you do not have an employer-sponsored retirement plan or if your income is below certain levels.
What Is The Income Tax Impact?
TRADITIONAL IRA: Income tax is due on all withdrawals, and withdrawals made prior to age 59 ½ may be subject to an additional 10 percent IRS penalty.
Is There An Age Limit On Distributions?
TRADITIONAL IRA: Distributions must start by age 70½
ROTH IRA: There is NO requirement to begin withdrawals at age 70½
Not on your contributions, but any earnings withdrawn before the account has been open for at least five years, and/or are not used for one of the qualified distributions, is subject to tax and a 10% IRS penalty.
Qualified distributions are:
Effective January 1, 2008, qualified retirement plan participants may now request a direct rollover of their plan assets to a Roth IRA. To be eligible the current traditional IRA to Roth IRA conversion rules apply. The participants modified adjusted gross income (MAGI), whether filling singly or jointly, may not exceed $100,000. Also, a married individual may not convert unless he/she files a joint federal income tax return. Compensation or earned income is not required, nor are there any age restrictions. (Note that the $100,000 MAGI limit and the joint filing requirement for married individuals will no longer apply for conversions occurring after December 31, 2009.)
Plan participants who meet their plans requirements, spouse beneficiaries of deceased plan participants, and spouses awarded some or all of a plan participant's assets through a divorce settlement, may take advantage of this new law.
Moving pretax assets to a Roth IRA is a taxable transaction. Some transaction flexibility is possible, however, allowing an individual to roll any combination of pretax and after-tax assets to a traditional IRA, a Roth IRA, or a combination of the two.
Effective January 1, 2006, 401(k) and 403(b) plans may allow participants to make salary deferrals to designated Roth accounts within the plan. Under IRC Section 402A, an employer can amend an IRC Section 401(k) plan or a tax-sheltered annuity plan under IRC Section 403(b) to permit its employees to designate their salary deferrals as Roth contributions.
Like Roth IRA contributions, salary deferrals designated as Roth contributions are not deducted or excluded from income going into a plan and are potentially nontaxable upon distribution. These salary deferrals and earnings attributable are held within the plan in what are referred to as designated Roth accounts. Distributions of these Roth salary deferrals, plus attributable earnings, are eligible for rollover to another 401(k) plan, a 403(b) plan or a Roth IRA.
Rollovers of designated Roth account assets to a Roth IRA are nontaxable.
A qualified distribution from a designated Roth account is:
A: Coverage you may have with other retirement plans does not affect your eligibility to make a Roth IRA contribution.
A: You are still eligible to make a Roth IRA contribution.
A: Yes, but you must have an adjusted gross income of less than $100,000. You are taxed on the rollover amount of the taxable portion of the Traditional IRA. The funds are not subject to the 10% IRS penalty tax.
A: We recommend you consult with your accountant or financial advisor to determine if a Roth IRA is right for you.
A: There are no special requirements for Roth IRA investments. Your choices range from federally insured Certificates of Deposit to more aggressive non-insured investment products.
A: Yes, the sooner your funds start working for you, the more your Roth IRA will be worth at retirement. Also, the five-year rule for qualified distributions begins when the first Roth IRA is opened.
A: You may move your Roth IRA from somewhere else to this bank. The five years begin when you open your first account. So, if you open it at another institution in 2006 and move it to our bank in the year 2008, we count the date the original account was opened (2006). Thus, you would be eligible for a qualified distribution in the year 2011.
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