Key Characteristics of Roth IRAs
By Kumar B Trivedi Published: 12/27/2008
Are there any tax benefits?
If your account has been open for at least five years, you withdraw at the age of 59 ½, use the funds to purchase a first home or become disabled you are not required to pay taxes on any investment gains.
Are there any eligibility requirements?
Single individuals with earned income below $99,000 can make full contributions including catch-up contributions.
What about vesting?
All contributions vest instantaneously.
What are the enrollment deadlines?
Roth IRA accounts must be set up by April 15 of the next year.
Are there any contribution deadlines?
All contributions must be made by April 15 of the next year.
What about contribution limits?
The contribution limits are up to $5,000 per year, or if you are over 50 up to $6,000. These limits are likely to increase by 2009 due to inflation.
What are the contribution sources?
Examples of contribution sources include earned income from salary, commissions, and/or alimony.
Are there any withdrawal penalties?
Roth IRA contributions are made by after-tax dollars and therefore do not apply for tax deductions.
What about transfers?
Almost all retirement plans can be transferred to other Roth IRAs.
What about borrowing?
Loans are not permitted from IRA accounts.
What about beneficiaries?
Primary and contingent beneficiaries can be designated and can be passed on income tax free.
What are Required Minimum Distributions?
There are no Required Minimum Distributions in Roth IRAs.
Are there any fees or minimums?
Annual fees range from $0-50 along with minimums that range from $0-25.