Roth IRA

 

A Roth IRA (individual retirement arrangement) is an account that helps you save after-tax dollars you can withdraw without taxes after age 59 ½1. Many investors save in an IRA in addition to their employer-sponsored plan. A Commerce Financial Advisor can help you compare a traditional IRA to a Roth IRA to determine which approach is best suited to your situation.

Features

  • Contributions can be withdrawn at any age without taxes or penalties.

  • Earnings you withdraw are tax-free after age 59½ if the account has been established for a minimum of five years.

  • Contributions can be made at any age if you have earned income.

  • No required minimum distributions during your lifetime

  • Beneficiaries may pay no income tax on proceeds.

  • A wide range of investment options is available.

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Considerations

  • Contributions are made with after-tax dollars and are not tax-deductible.

  • Premature withdrawals in excess of contributions are fully taxable and subject to an early withdrawal penalty.

Tax Considerations*

  • Contributions can only be made with after-tax dollars.

Type of Investments

  • Stocks, bonds, mutual funds, exchange-traded funds (ETFs), U.S. Treasuries, Brokered CDs, unit investment trusts (UITs), and annuities

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Eligibility

  • Anyone who has earned income equal to or greater than their IRA contribution amount

  • If you contribute to an employer-sponsored plan such as a 401(k), you are still eligible to contribute to a Roth IRA if you meet the Income Limits below.

  • If you have no earned income but your spouse earns enough income to cover your contribution as well as his or her own, you can contribute to a Roth IRA.

Annual Contribution Limits

  • $6,500 under age 50

  • $1,000 additional catch-up contribution if age 50 and over

  • You may contribute simultaneously to a Traditional IRA and a Roth IRA (subject to eligibility) if the total contributed to all (Traditional and Roth IRAs) does not exceed described limits.

Income Limits

  • Your Modified Adjusted Gross Income (MAGI) cannot exceed:

      • $153,000 for single filers

      • $228,000 for joint filers

  • Contributions are phased out for single filers with a MAGI between $138,000 and $153,000, and for joint filers with a MAGI between $218,000 and $228,000.1

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Disclosures:

* Commerce Financial Advisors does not provide tax advice or legal advice to customers. Consult a tax specialist regarding tax implications related to any product and specific financial situations..

1 IRS https://www.irs.gov/retirement-plans/amount-of-roth-ira-contributions-that-you-can-make-for-2023

 

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