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The Benefits of a Roth IRA
A Roth IRA provides a valuable investment opportunity because your account
contributions grow 100% tax free! To qualify for tax-free earnings, the Roth
IRA must be held at least five years and a withdrawal from your account must
be triggered by a qualifying event, such as turning age 59-1/2, disability,
purchase of your first home or upon your death.
In 2008, you may contribute up to $5,000 a year to a Roth IRA, and investors
over 50 may contribute an additional $1,000 a year. To open an IMS Funds Roth
IRA, please download a prospectus and application.
For more information, call us at 1-800-408-8014 or write us at
questions@imscapital.com.
The ability to open and contribute to a Roth IRA is based upon your income.
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Tax Filing Status
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100% Eligible
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Partial Eligibility
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Not Eligible
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Single
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under $101,000
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$101,000-$116,000
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over $116,000
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Married, Filing Jointly
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under $159,000
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$159,000-$169,000
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over $169,000
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A Valuable Tax-Free Opportunity for all Investors
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A little known opportunity is looming for investors who were previously shut out
of Roth IRAs due to their income. Beginning in the year 2010, any investor, regardless
of their income level, can convert their Traditional IRA assets to a Roth IRA and
benefit from tax- free appreciation. Previously, Roth IRAs and Roth IRA Conversions
were only available to investors whose adjusted gross incomes were less than or equal
to $169,000 and $100,000, respectively (for married taxpayers filing jointly). But
Congress legislated away those conversion limitations effective in 2010.
There’s no requirement that you have to convert all existing IRA assets in 2010, but
there is added incentive for investors to convert in 2010, because you can spread the
taxes due over 2011 and 2012. Although you can choose to convert to a Roth in later
years, there is always a chance that taxes may go higher.
Roth IRAs are attractive because:
Earnings grow 100% tax free (provided you withdraw them after age 59-1/2 and the
account is at least 5 years old).
There are no minimum distribution requirements (Traditional IRAs require you to begin
drawing down your account once you reach age 70-1/2).
Roth IRAs pass to your heirs tax-free.
Should you decide to convert your Traditional IRA to a Roth in 2010, there are several
considerations. Once you convert your IRA, all the assets that had accumulated in the
account on a tax-deferred basis get added to your income for that year, thus potentially
raising your tax bracket. Although the IRS allows you to pay taxes on the gains over a
two-year period, this could be a sizeable hit for some tax payers, so it’s wise to start
planning now. The conversion opportunity is most attractive if you use assets other than
your IRA to pay the taxes. Remember too that if your IRA has been funded exclusively with
nondeductible contributions, only the earnings would be subject to tax, not the entire
account balance.
Income limits are still applicable for contributions to a Roth IRA, but if you are planning
to convert a Traditional IRA, you make contributions to your Traditional IRA up through the
year you convert to a Roth, and still get the benefit of tax-free earnings on your annual
contributions.
For more information on converting your IRA to a Roth, please call us at 1-800-408-8014.
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