Roth

Here is some info on a Roth IRA that I think is important for people to know:

* At any time, the Roth IRA owner may withdraw up to the total of his contributions (in nominal dollars).

* If there is money in the Roth IRA due to conversion from a Traditional IRA, the Roth IRA owner may withdraw up to the total of the converted amount, as long as the "seasoning" period has passed on the converted funds (currently, five years).

* Earnings withdrawals become automatically qualified in the tax year the participant reaches age 59.5 or becomes disabled, so long as the account is "seasoned" (established for five or more years).

* Up to $10,000 in earnings withdrawals are considered qualified if the money is used to acquire a principal residence. This house must be acquired by the Roth IRA owner, their spouse, or their lineal ancestors and descendants. The owner or qualified relative who receives the "first time homeowner" distribution must not have owned a home in the previous 24 months.

* If a Roth IRA owner dies, and their spouse becomes the sole beneficiary of their Roth IRA while that spouse also owns a separate Roth IRA, the spouse is permitted to combine the two Roth IRAs into a single account without penalty. Additionally, qualified distributions are also available to other beneficiaries of Roth IRA owners. See IRS Pub 590 for complete details.

* If the Roth IRA owner expects his tax bracket after retirement to be higher than before retirement, there is a tax advantage to making contributions to a Roth IRA over a traditional IRA or similar vehicle. There is no current tax deduction, but money going into the Roth IRA is taxed at the lower current rate, and will not be taxed at the higher future rate when it comes out of the Roth IRA. If a taxpayer is currently in the 15% tax bracket, then a $1,000 contribution to a traditional IRA would provide a $150 reduction in current-year tax liability. If that taxpayer were in the 30% tax bracket upon retirement, $1000 of traditional IRA distributions would incur $300 in taxes. Therefore, the person would pay twice as much for after retirement income as he received in tax benefits from the traditional IRA deduction (and since gains are compounded, this comparison is valid). Therefore, the Roth IRA offers a specific advantage where a person will retire in a higher tax bracket than that used during his or her pre-retirement years.

* Perhaps the greatest advantage of the Roth IRA is its lack of forced distributions based on age. All other tax-deferred retirement plans, including the Roth IRA's cousin, the Roth 401(k),[1] require withdrawals to begin at age 70½ (more precisely, by April 1 of the calendar year after age 70½ is reached), and impose an annual minimum distribution once withdrawals begin at any age beyond 59½. The Roth IRA is completely free of these mandates.