The Roth IRA - in Brief I.          Major Benefits Unlike traditional IRA'S, there are no taxes owed on earnings when you begin taking distributions after age 59 1/2 and account is held 5 years. Tax free withdrawals are allowed before retirement for 1st time home purchases or certain higher education expenses. Unlike traditional IRA'S, there is no requirement to stop contributions or begin withdrawals at age 70 1/2. II.          Who Qualifies? Individuals of any age with AGI below $110,000, if single or $160,000, if married. Individuals covered by employer's plan or individuals with existing IRA’s. III.         Contribution Amounts $4,000 for individuals. $8,000 for married couples filing jointly. Additional $1,000 for individuals age 50 or more. IV.        Two Major Questions? For Answers, contact your CPA at Erickson, Brown &Kloster Should I contribute? Should I rollover funds from my regular IRA to a Roth IRA? V.         Conversion Issues Only allowed if AGI is less than $100,000 in the year converted. Decision to convert depends on: Tax brackets Age Time until retirement Individual financial status and needs How long you might leave Roth IRA funds before withdrawing them. VI.        Points to Consider If you pay the taxes from other sources you're way ahead and will avoid possible distribution and penalty tax. If you intend to leave assets to heirs, Roth is generally better. Generally, the younger the investor, the greater the advantage of the Roth. GeneralIy, the longer the withdrawal period in retirement, the more advantageous the Roth is. Generally, the higher the rate of return, the greater the advantage of the Roth. If tax bracket at retirement is expected to approximate or exceed your current tax bracket, the greater the advantage of the Roth. Coordinate with other investment alternatives ie. 401 (k), company plans, insurance etc. VII.       Set-up Issues 5305-R is a model form from the IRS to establish a Roth IRA with a financial institution. (usually completed by the institution) Roth IRA must be a separate account. Do not combine with existing IRA's.   4565 Hilton Parkway, Suite 101 Colorado Springs, CO 80907 (719) 531-0445   •  Fax: (719) 531-0448 1-888-733-3345           old logo