Important Facts About the Roth IRA

• Contributions are made only on a non-deductible basis – the tax benefit is realized when funds are withdrawn.
  
  
• Contribution limits are adjusted annually:

• The Roth IRA is only available to those whose income is below a certain level:
  • Single filers with an income of up to $95,000 qualify for a full contribution; incomes of between $95,000-$110,000 qualify for partial contribution.
  • Joint filers with an income of up to $150,000 qualify for a full contribution; incomes of between $150,000-$160,000 qualify for partial contribution.
    
    
• Contributions are permitted after age 70.5 as long as the individual or the individual's spouse has earned income.
  
  
• There is no requirement that withdrawals commence at age 70.5.
  Contributions are not tax deductible but are not subject to federal income tax on withdrawal.
  
  
• Earnings accumulate tax-deferred and may be withdrawn tax-free if:
  1. The withdrawal occurs more than five years after the individual first contributed to the Roth IRA; and
  2. The individual is at least 59.5 years old, disabled, dead, or the funds are used to purchase a first home.
     
     
• The 10% premature distribution tax penalty for withdrawals of earnings before age 59.5 will be waived for qualified higher education expenses, first-time home purchases, disability, death and certain medical expenses.

Converting from a Traditional IRA to a Roth IRA
Taxpayers with adjusted gross incomes not exceeding $100,000,whether single or joint filers, can roll over assets from a traditional IRA into a new Roth IRA. Once rolled over, these assets continue to accumulate tax-deferred until withdrawn. Income taxes will be imposed on the taxable amount that is rolled over, but there is no premature distribution penalty.

Can I have both?
Individuals can have both a traditional IRA and a Roth IRA, but they cannot contribute more than the combined maximum to these accounts (for example, in 2006 an individual age 49 or below may contribute a total of $4,000 to both IRA accounts, not $4,000 for each account). Individuals who are not eligible for deductible contributions to a traditional IRA or are not eligible for a Roth IRA may still make nondeductible contributions to a traditional IRA.