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Roth IRA

A Roth IRA is a personal savings plan that operates somewhat in reverse compared to a traditional IRA. For instance, contributions to a Roth IRA are not tax-deductible, while contributions to a traditional IRA may be deductible. However, while distributions (including earnings) from a traditional IRA may be included in income, the distributions (including earnings) from a Roth IRA are not included in income. For both IRA types - traditional and Roth - earnings that remain in the account are not taxed.

Benefits:

  • Under current laws, tax-free investment earnings and tax-free income distributions start at age 59½ as long as you have had your Roth IRA account for at least five years.
  • Contributions can continue past age 70½ if you're still earning income.
  • Contributions can be withdrawn at any time with no tax penalties.

Eligibility:

  • You must have earned income (as opposed to investment income only).
  • You can contribute to a Roth IRA even if you participate in an employer-sponsored plan.
  • To make a full contribution, your 2013 modified adjusted gross income must be less than $112,000 if you're a single taxpayer, or less than $178,000 if you're married and filing jointly.

Contribution Limits:

Roth IRA limits on annual contributions for 2013* are:

  • $5,500 for single individuals up to age 50
  • $6,500 for individuals age 50 and over
  • $11,000 to $13,000 for married couples filing jointly ($5,500 maximum for each joint filer up to age 50, $6,500 for each at age 50 and older)
  • If you wish, you can contribute to a Traditional IRA and a Roth IRA in the same year, but your total contribution is limited to the amounts shown above.

*Eligibility and contribution amount information is valid as of January 1, 2013.

First American Bank & Trust and its directors, officers, employees (collectively, "First American") are not permitted to give legal or tax advice. While First American can assist clients in the areas of estate and financial planning, only an attorney can draft legal documents, provide legal services and give legal advice. Customers of First American should consult with their legal and tax advisors prior to entering into any financial transaction or estate plan.

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