First State Bank & Trust Co.
ROTH IRA
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With an Individual Retirement Account from First State Bank & Trust Co., you can begin
preparing for your retirement today. The ability to receive tax free earnings on your contributions
makes a Roth IRA a powerful tool to save for your future. It has many similarities to a Traditional IRA, but
instead of deferring taxes, you may not have to pay taxes on your earnings at all!
Who is eligible to contribute to a Roth IRA?
There is no maximum age limit for contribution to a Roth IRA as there is with a Traditional IRA. You may contribute if you have
earned income and your modified adjusted gross income (MAGI) does not exceed the limits prescribed below:
| Full Contribution
if MAGI is less than: | Partial Contribution
if MAGI is between: | No Contribution
if MAGI is above: |
Single Filer
| $95,000 | $95,000 - $110,000 | $110,000 |
Married
Filing Jointly | $150,000 | $150,000 - $160,000 | $160,000 |
How much can I contribute each year?
In 2001, Congress passed the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) which
increased the amounts of contribution. In addition, IRA owners who will turn 50 or older this year
can make additional contributions called "catch-up" amounts to make up for their lost savings.
Qualified participates are permitted to contribute the following maximum amounts each year, or 100% of your
income, whichever is less.
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Maximum Contribution Limits |
| Year | Under Age 50 | Over Age 50 | |
2006
2007
2008 |
$4,000
$4,000
$5,000 |
$5,000
$5,000
$6,000 |
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Starting in 2009, the contribution limit will be adjusted annually for inflation in $500 increments.
Are my contributions tax deductible?
With a Roth IRA, your contributions are not tax deductible. However, if you expect to be in a higher tax bracket when you retire,
a Roth IRA may benefit you more than a Traditional IRA.
Are my funds taxed at distribution?
No, that's the best part about a Roth IRA! You may make withdrawals tax and penalty free as long as your distributions meet the following guidelines:
- the distribution is made after the 5-year
holding period, and
- the distribution is made:
- after you reach the age 59½,
or
- due to permanent disability,
or
- to a beneficiary in the case
of death, or
- it is used for a first-time home purchase.
If your distribution does not meet the above requirements, you may be assessed a 10% IRS early withdrawal penalty.
Can I convert my Traditional IRA to a Roth IRA?
Yes, if you are a Single filer or married filing jointly with a MAGI of less than $100,000. Any part of
the converted amount that can be attributed to a deductible contribution must be included as taxable income for
the year in which the conversion is made.
For additional information on Traditional or Roth IRAs, come by First State Bank & Trust Co. today
and speak to an IRA representative.
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