Roth IRA

StateTrust advises clients on how to reach their retirement goals by making available an array of products that can be used for this objective. One important retirement product available for United States residents is the Roth IRA.

The Roth IRA has the following characteristics:

  • It is a savings vehicle to obtain tax-free growth while building retirement savings.
  • Individuals can contribute US$5,000 if single or US$6,000 if married and 50 or older.  These limits may vary according to the IRS (Internal Revenue Services) on a yearly basis.
  • In contrast with other types of IRA plans, contributions are made with after tax income.
  • Depending on your modified adjusted growth income you may or may not be able to contribute into a Roth IRA plan.
  • Can be combined or rolled-over with other Traditional IRAs.
  • It is a retirement product for US investors.

The benefits of a Roth IRA are:

  • Earnings grow federally tax-free, assuming certain requirements such as age and holding periods are met.
  • Distributions are tax-free and penalty-free after age 59½ and a hold period of at least 5 years. 
  • No required minimum distributions at age 70½ as is the case with Traditional IRAs.
  • You can continue to make contributions after you reach age 70½ as long as the combined earned income of taxpayer/spouse is equal to or more than the contribution.
  • Provides taxable diversification* of retirement assets.
  • Assets can be passed tax-free to heirs.
  • For rollover conversion in Fiscal Year 2010, the taxes resulting from the income conversion can be paid “all” in the 2010 tax filling or can be “split 50/50” on the 2011 and 2012 tax fillings.

* Diversification does not guarantee a profit or ensure against loss.

While contributions to a Roth IRA are based on after-tax funds, you can recoup considerable tax savings on earnings from your investments over the long-term. After five years, any money you withdraw could be completely tax-free as long as:

  • You are 59 ½ or older.
  •  It is for health insurance premiums (certain unemployed individuals).
  •  You are using the money for a qualified first-home purchase.
  •  You are disabled.
  •  You have certain medical expenses that are more than 7.5% of your Adjusted Gross Income.
  •   It is for qualified higher-education expenses.
  •   The payment is going to your beneficiary in the event of your death.

Retirement & Education Accounts