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© 2002 United Transportation Union Insurance Association
A Fraternal Benefit Society
Call Us Today!
1-800-558-8842
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What is
a Roth IRA? The
Taxpayer Relief Act of 1997 created an Individual Retirement
Annuity (IRA) known as a Roth IRA, authorized by the federal
government to help you accumulate funds for retirement. The Roth
IRAs principal difference from most other tax advantaged
retirement plans is that, rather than granting a tax break for
money placed into the plan, the tax break is granted on the
money withdrawn from the plan during retirement.
Who can contribute to a Roth
IRA?
If you receive compensation for personal services (wages,
salary, commissions, tips, etc.), you may contribute to a Roth
IRA.
How much may I contribute?
The maximum contribution amount is the lesser of your
compensation or $5,000 ($6,000 if you are age 50 or older);
reduced by your Modified Adjusted Gross Income as shown below.
If you are married and filing a joint tax return with your
spouse, you may also make a contribution to a separate Roth IRA
established for the exclusive benefit of your spouse, even if
your spouse has received no compensation during the tax year.
Limits for the non-working spouse are the same as for the
working spouse.
You can make contributions to your Roth IRA anytime up to and
including the due date of your federal tax return for the
previous year, namely, April 15.
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If your filing status (2012)
is … |
And your modified adjusted gross income is
… |
Then
… |
|
Married filing jointly or qualifying widow(er) |
Less than
$173,000 |
You can contribute up to $5,000 ($6,000 if you are
age 50 or older). |
At least $173,000,
but less than $183,000 |
The amount you can contribute is reduced. |
|
$183,000 or more |
You cannot contribute. |
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Married filing separately and you lived with your
spouse at any time during the year. |
Less than $10,000 |
The amount you can contribute is reduced. |
|
$10,000 or more |
You cannot contribute. |
|
Single,
head of household or married filing separately and
did not live with spouse any time during the year. |
Less than $110,000 |
You can contribute up to $5,000 ($6,000 if you are
age 50 or older). |
At least $110,000,
but less than $125,000 |
The amount you can contribute is reduced. |
|
$125,000 or more |
You cannot contribute. |
When can funds be
withdrawn?
Since Roth IRA contributions (principal) are made with
after-tax dollars you may withdrawal these contributions
tax-free and IRS penalty-free anytime. You may withdrawal
earnings tax-free and IRS penalty-free as long as your IRA
has been established for at least five years and you are
over age 59½.
You may also benefit from the following tax advantages:
Tax-Free and IRS Penalty-Free
Withdrawals for First-Time Home Purchase.
As long as your Roth IRA has been established for at
least five years, you can take tax-free and IRS penalty-free
withdrawals ($10,000 lifetime limit) prior to age 59½ to
apply toward buying a home for you, your spouse, your
children or your grandchildren. The withdrawals must be used
for qualified first-time home expenses.
IRS Penalty-Free Withdrawals Prior
to Age 59½ include:
- Qualified higher education
expenses for you, your spouse, your children or your
grandchildren;
- Payment of major medical
expenses (exceeding 7.5% of your AGI);
- Payment of health
insurance premiums by certain unemployed individuals;
- Death or disability of the
IRA owner;
- Distribution by way of
certain substantially equal periodic payments.
Withdrawals in excess of contributions are, however,
subject to income taxes.
There is a UTUIA surrender charge of 5% for the first through
third policy years, decreasing 1% per year through the seventh
policy year. After seven years, 100% of the annuity value can be
withdrawn without a UTUIA surrender charge. In addition, after
the first policy year, 10% of the annuity value may be withdrawn
once per policy year without a UTUIA surrender charge.
Am I required to take a distribution?
The Roth IRA does not require minimum distributions beginning at
age 70½, giving you additional time to take advantage of
tax-free earnings. In fact, you are never required to withdraw
your money at any age, so you can pass your Roth IRA assets on
to your beneficiaries if you wish.
Note: All references to tax deduction and taxation of
benefits refer only to the federal income tax law. Check state
law for the applicability of state income taxes to IRA earnings
distributions.
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