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The Roth Individual Retirement Account

A Roth IRA allows you to avoid future taxation of your retirement funds by making nondeductible contributions now. Contributions for the 2015 tax year can be made any time beginning January 1, 2015, up to and including April 15, 2016.

Rules of the Roth IRA

Following is a partial summary of the rules for Roth IRAs.


  • Contributions to a Roth IRA are nondeductible regardless of your income level or participation in an employer-sponsored retirement plan.
  • Contributions are limited to $5,500 a year ($11,000 for couples) for the 2015 tax year. Investors aged 50 and older can make an additional $1,000 "catch up" contribution annually.
  • Income thresholds determine whether you are eligible for a Roth IRA. For 2015, single taxpayers with modified adjusted gross incomes (MAGIs) between $116,000 and $131,000, and married couples filing jointly with MAGIs between $183,000 and $193,000 are eligible for a partial contribution. Taxpayers earning less than these thresholds may make the full contribution. Those earning more are not eligible.
  • Qualified distributions are tax free. To qualify, you must have maintained the Roth IRA for five years and:
  • Be at least 59½ years old. Withdraw up to $10,000 (lifetime limit) and use the money for a first-time home purchase. Become permanently disabled.

Conversion of a Traditional IRA to a Roth IRA

There are no longer any income restrictions on converting a traditional IRA to a Roth IRA. (Prior to 2010, taxpayers with MAGIs of more than $100,000 were prohibited from making the conversion.) If you have a traditional IRA and your contributions were not tax deductible, investment earnings and capital gains will be taxed but contributions will not. The withdrawal from your traditional IRA will count as income but will not affect your eligibility for the Roth conversion.

If you have a traditional IRA that has declined in value because of the recent stock market downturn, you may want to consider whether converting to a Roth IRA is appropriate given your situation. You may be paying taxes on a smaller amount than you would have several years ago.

Because IRA rules are complex, ask your financial advisor whether maintaining a Roth IRA, or converting a traditional IRA to a Roth account, is suitable given your situation.

Traditional IRA account owners should consider the tax ramifications, age and income restrictions in regards to executing a conversion from a Traditional IRA to a Roth IRA. The converted amount is generally subject to income taxation. The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax free, as long as they are considered qualified. Limitations and restrictions may apply. Withdrawals prior to age 59 may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. Their tax treatment may change. This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

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