Roth Iras: Test your knowledge How do you know Roth IRAs? Here are five tough questions. Let's see how you do ...
1. I am 72 years now and still working. Can I set up a Roth IRA?
Yes. Unlike a traditional IRA, which does not allow contributions past age 70 1 / 2, Roth IRAs have no age limits. You can continue to contribute to your Roth as long as you have compensation.
2. I am married, age 57, file a joint tax return and to $ 65,000. I am a participant in a 401 (k) plan work and put $ 5,000 in my own traditional IRA. Can I set up a Roth IRA?
Not in the tax year in question. You've already put your regular contribution limit ($ 4,000) in your traditional IRA with another $ 1,000 catch-up contribution is allowed because you are over 50 years. In your case, you made the maximum contribution to the IRA. If you put less in your traditional IRA, you could put the difference, up to $ 5,000 in a Roth IRA.
3. I am single and my modified adjusted gross income for 2006 was $ 115,000. I already have a Roth IRA. Can I make a contribution for 2006?
No, you make too much money. For 2006, if your modified adjusted gross income was less than $ 95,000, you could fully contribute to your Roth IRA. The rules say if it was more than $ 110,000, you can not make a contribution. If it was between $ 95,000 and $ 110,000, there is a formula to calculate a partial contribution limit.
If you were married and filed a joint declaration, you could have up to $ 150,000 and made a full Roth IRA contribution. If you were married and your modified adjusted gross income was more than $ 160,000, no contribution would have been possible. For incomes between these numbers, a partial contribution determined by a formula could be made.
Also note the income limits are now indexed, they will be higher in 2007 and beyond.
4. I already have a traditional IRA and I want to roll on a Roth IRA. Is this possible?
It depends on four things: In what year it is, how much money you make, your marital status and type of tax return you file. If you talk about a tax year before 2010 and your adjusted gross income exceeds $ 100,000, or you are married and file a separate return, you can not convert your traditional IRA to a Roth. Period.
After 2009, these limitations do not apply and you're good to go. In addition, you can spread the tax payable on the tax roll in 2011 years and 2012.
5. I am 55 years old and have had my Roth IRA for 3 years. I just went on disability and the need to remove much of it. The withdrawal taxable? And since I am not 59 1 / 2 I have to pay the penalty tax of 10%?
Your Roth IRA consists of two elements: your contributions and earnings. You can withdraw any amount to your total tax free contributions.
For any withdrawal benefit to tax-free, the distribution must be a "qualified distribution". To qualify, the distribution must be made after five years of assessment beginning with the first contribution Roth.
Then, assuming that the five-year rule is satisfied, you can withdraw money tax-free if you are over 59 1 / 2, disabled, or buying a first home for you, your spouse, children or grandchildren ($ 10,000 maximum). The rules continue to say if you die and your spouse elects to treat your Roth IRA as their own, distributions are qualified.
Distributions before age 59 1 / 2 are subject to a penalty tax of 10% premature. However, this tax applies only if the distribution is included in income. If you take your contributions, they are not taxable.
In your case, you are eligible for one of the exceptions: disability. There is no penalty tax of 10%.
.
Posted on February 10, 2010.
