ROTH IRA

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:
 

Roth IRA Eligibility MAGI Thresholds

Filing Status

Tax Year

Full Contribution

Partial Contribution

No Contribution

Single

2012

< $110,000

Between $110,000 and $125,000

> $125,000

2013

< $112,000

Between $112,000 and $127,000

> $127,000

Married, Joint

2012

< $173,000

Between $173,000 and $183,000

> $183,000

2013

< $178,000

Between $178,000 and $188,000

> $188,000

Married, Separate

2012

N/A

< $10,000

> $10,000

2013

N/A

< $10,000

> $10,000

*If you are married, filing separately, and lived apart from your spouse the entire year, you can use the MAGI limit for a single filer to determine your contribution limit.

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.

Maximum Contribution Limits
Year Under Age 50 Over Age 50
2006
2007
2008
2009
2010-2012
$4,000
$4,000
$5,000
$5,000
$5,000
$5,000
$5,000
$6,000
$6,000
$6,000
2013 $5,500 $6,500

 

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:

  1. the distribution is made after the 5-year holding period, and
     
  2. 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.

What Assets Can I Move to a Roth IRA?

  • Traditional IRA - Traditional IRA assets may be converted to a Roth IRA. The distribution is subject to income tax, but is not subject to the 10 percent premature-distribution penalty tax.
  • Employer Plan - Eligible assets from an employer plan may be rolled over or directly rolled over to a Roth IRA. The taxable portion of the direct rollover amount is subject to federal income tax.

For additional information on Traditional or Roth IRAs, come by First State Bank & Trust Co. today and speak to an IRA representative.