Roth IRA

Contributions may be made to a Roth IRA as long as you have earned income, but may be limited based on your filing status and income.  The IRS publishes the annual Roth IRA contributions and earnings limitations each year.    The amount of contributions may be split between Roth IRA and Traditional IRA contributions, but may not exceed the overall limitation on Roth or IRA contributions.

Our first priority is helping you take care of yourself and your family. We want to learn more about your personal situation, identify your dreams and goals, and understand your tolerance for risk. Long-term relationships that encourage open and honest communication have been the cornerstone of my foundation of success.

Our first priority is helping you take care of yourself and your family. We want to learn more about your personal situation, identify your dreams and goals, and understand your tolerance for risk. Long-term relationships that encourage open and honest communication have been the cornerstone of my foundation of success.

You may convert a Traditional IRA to a Roth, in whole or in part.  The amount converted is considered taxable income in the year of conversion.  The 10% penalty tax does not apply.  There are no limitations on the amount you may convert.

The concept of an IRA to Roth conversion is paying the tax in the present on the current balance may allow you to enjoy future tax-free income in the future on a potentially larger balance.

Your funds in employer sponsored plans, like 401(k), 457(b), 403(b) may be rolled over to a Designed Roth Account in the same plan, if the plan has a Roth IRAs and permits such rollovers.  Plan provisions may vary, your Summary Plan Description will contain this information, or ask your Plan Representative.    Such conversions may occur at any time, regardless of age, if the funds are staying in the same plan.

When you are eligible to distribute  funds from employer sponsored plans, like 401(k), 457(b), or 403(b) plans may be rolled to an Individual Roth IRA account.  

Both types of transactions will make the amount converted to be reported as taxable income.  You will likely have to pay income tax on the amount of conversion.  The 10% tax penalty does not apply to conversions.

Our Advisors may help determine whether a rollover is suitable for you.

Roth contributions may be invested in stocks, mutual funds, and similar types of investments, held by custodians, banks or invested in annuity contracts.    You may choose your own investment risk level.  Knox Financial Services offers advisory services for Roth IRAs, where we work with you to find investments that match your time horizon, attitude about investing, and available funds.

Under current tax law, you may withdraw your cumulative contributions (less prior withdrawals) from a Roth IRA at any time, without income tax.  Earnings will be tax-free if you have: 

• Held the account for 5 years, and
• are:
  • age 59 1/2 or older;
  • disabled; or
  • deceased

Tax-free distributions are available after 5 years, regardless of age, of up to $10,000 to buy your first home.

Earnings distributed without the exceptions above are taxed as ordinary income, along with a 10% IRS imposed tax penalty, unless an exception applies.  

Contributions to a Roth IRA are made with after-tax dollars or take-home pay.  The funds used to purchase the Roth IRA have already been taxed, the taxes are paid in the present.  Under current tax law, future qualified distributions are income-tax free.

With a Traditional IRA, contributions help you reduce current income tax and are deferred until withdrawn, while you pay the tax in the future.  

A Roth IRA may be appealing for those who wish to save for retirement, but also desire liquidity prior to age 59 1/2.

Contributions to a Roth IRA may be distributed at any time and are returned tax-free, regardless of age.  For example, if you contribute $6,000 each year to a Roth IRA for 5 years, you retain liquidity of the cumulative $30,000 contributions.  Withdrawals of contributions will reduce the net contribution available for withdrawal.  Please keep in mind that earnings/gains must be kept in the Roth IRA account until age 59 1/2, disability or death to be received tax-free.  In addition, up to $10,000 may distributed from a Roth IRA for purchase of your first home, regardless of age.

Is A Roth IRA better than a Traditional IRA?  It depends on your situation.  Read more by clicking The Great Debate below.

Our first priority is helping you take care of yourself and your family. We want to learn more about your personal situation, identify your dreams and goals, and understand your tolerance for risk. Long-term relationships that encourage open and honest communication have been the cornerstone of my foundation of success.