An Overview of the Roth IRA

The Tax Relief Act of 1997 took some giant steps in the direction of offering tax benefits to retirement savers. One major step was the addition of a new tax-advantaged way to invest for a secure retirmement. This is known as the Roth IRA.

With a Roth IRA, the consumer does not receive any deduction or deferral on their annual contribution. Contributions are made with after tax dollars.

Not everyone is eligible to contribute to a Roth IRA. Your eligibility depends on you adjusted gross income. If you are single and your income is below $95,000, the amount you can contribute to a Roth IRA is phased out for incomes between $95,000 and $110,000. For married couples filing jointly, the maximium contribution begins phasing out at $150,000.

Withdrawals from a Roth IRA are not taxed if the withdrawal is made because of the death or disability of the owner of the IRA, or to cover the costs of a qualified first-time purchase. Also, the Roth IRA does not require that withdrawals begin at age 71.5. You can keep your money in a roth for as long as you want.

Source: CFE inTOUCH, March 1998, p. 4

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