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February 16, 2009

Roth IRA

Your Guide

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Definition

A retirement savings vehicle, wherein earnings accrue on a tax-deferred basis and distributions are tax-free if qualified. A Roth IRA can be either of the following:

  • An individual retirement ‘account’ , which can be established at a bank, credit union, brokerage firm, savings & loan, or other financial institution that satisfies the requirements established under the tax code IRC § 408(n)
  • An individual retirement annuity-contract issued by an insurance company

Contributions to Roth IRAs are not tax-deductible.

In addition to having taxable compensation/income, an individual must meet income requirement in order to be eligible to contribute to a Roth IRA. The MAGI limits can be found here under the definition of IRA

Referring Cite

IRC § 408A, IRS Publication 590

Additional Helpful Information

  • Individuals may contribute up to 100% of their taxable compensation/income up to the dollar limit that is in effect for the year to their traditional IRAs and/or Roth IRAs. Individuals who reach age 50 by the end of the year may contribute additional amounts referred to as ‘Catch-up’ contributions.
  • The dollar limits as of 2005 can be found here under the definition of IRA
    An individual can split the annual limit between a traditional IRA and a Roth IRA, or contribute the entire amount to either
  • IRA contributions must be made in cash

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at http://irapublications.com. Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.

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