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Roth IRA

The Roth IRA is one of the most beneficial retirement plan available. All contributions are made after tax, and the earnings—including interest, dividend income, and capital gains—grow tax free.

You can fund a self-directed Roth IRA a few different ways. You can transfer funds and assets from an existing Roth or traditional IRA and/or make an annual contribution if you are eligible to do so. You can also rollover funds from a 401(k) or pension plan.

Features:

  • Tax-deferred earnings, which can be distributed tax free (see requirements below)
  • Contributions can be made regardless of your age as long as you have earned income
  • Required minimum distributions (RMDs) are not required
  • A self-directed Roth IRA allows every alternative investment available

Eligibility:

  • Anyone who has an existing Roth account can move those funds to a self-directed Roth IRA regardless of income level.
  • Anyone with an existing traditional or SEP IRA or other tax-deferred account can convert those funds to a self-directed account, but there are tax consequences for doing so
  • Contributing directly to a Roth IRA: Anyone with earned income and whose modified adjusted gross income is less than (for 2019):
    • Married individuals filing jointly: $203,000
    • Single or head of household: $137,000
    • Married, filing separate returns: $10,000

Contributions Limits:

CONTRIBUTION LIMITS 2018 2019
Traditional IRA $5,500 per year $6,00 per year
Catch-up Contribution $1000 catch-up contribution if 50 and older $1000 catch-up contribution if 50 and older

Tax-Free Distributions:

Distributions of your contributions are tax free. Other distributions from this plan are tax free (and penalty free) as long as you:

  • Are at least 59 ½ years old AND have had the account for at least five years. The five-year clock starts when you open and fund your first Roth IRA.
  • You are under the age of 59 ½, there is a 10-percent penalty on most distributions and the distribution may be included in your income. There are some exceptions this rule including:
    • You inherit the plan
    • You are disabled
    • You are a first-time home buyer
    • You are paying education expenses for you or your dependents

A self-directed Roth IRA is right for you if:

  • You want to continue contributing to your plan after 70 ½ years of age
  • You want to pass on a tax-free account to your beneficiaries
  • You expect your tax bracket during retirement to be equal to or higher than your current tax bracket
  • You want to invest in options besides stocks and bonds