Is a Roth IRA right for you?
If you anticipate being in a higher tax bracket when you’ll be taking withdrawals, a Roth IRA could be an excellent choice for you. In terms of accessing your money, a Roth IRA could be a more flexible choice, since you can typically withdraw your contributions at any time without paying penalties or taxes. However, you cannot withdraw any of the interest you’ve earned before age 59-1/2 or within 5 years of contributing to a Roth IRA without paying taxes.
If you have one or more Traditional IRAs, you may find transferring your assets ("converting" them) to a Roth IRA offers attractive benefits, including the opportunity to take advantage of tax-free growth for your savings. While you will owe current taxes on the amount you convert, you will be able to withdraw your money penalty- and tax-free in the future, under certain circumstances.
How much can you contribute to a Roth IRA?
A Roth IRA allows you to save up to $5,000 a year toward your retirement using after-tax money. And if you’re age 50 or older, your contribution limit jumps to $6,000 annually.
Are you eligible to contribute to a Roth IRA?
- If you have earned income from employments and are within certain adjusted gross income limits, you can contribute to a Roth IRA. Click here to view the 2011 limits
- Married individuals filing separately cannot convert their assets, regardless of income level.
There is no additional tax deferral benefit for annuity contracts purchased in an IRA or other tax-qualified plan, since these are already afforded tax-deferred status. Thus, an annuity should only be purchased in an IRA or qualified plan if you value some other features of the annuity and are willing to incur any additional costs associated with the annuity to receive such benefits.