Rethink Your Rollover

Posts Tagged ‘contribution’

Roth IRA deadline 2008

Question: Can I withdraw my contributions from Roth IRA tax free?

I opened a Roth IRA account with Ameritrade in february 2009. I have contributed $5000 for the 2008 tax year (before april 15th 2009 tax year deadline) and $2600 for this tax year. I was trading stock with my Roth IRA and got some earnings.
Question: Can I withdraw my contributions ($7600 total) penalty and tax free? Would I need to fill out any IRS forms?
I urgently need that money.
Big Thanks to anyone who gives a well informed answer.

Answer: holding period for Roth is five years
you can probably take out the $2600 contribution for 2009 since the deadline for contribution has not been reached

Roth IRA contribution limits

Question: Why do 401k and IRA have different limits? Don’t all 401k contribution go into either IRA or Roth IRA?

I am still very confused after reading the answers on various sites on the difference between 401k and IRA.

Answer: The limits are much higher in a 401k because the distribution rules are much more strict. In exchange for investing in a retirement plan that does not allow for distributions at any time you are able to invest more money.

Has zero to do with matching of funds by employer.

And no contributions don’t go into an IRA or a Roth IRA. Many people mistakenly believe that an IRA is the best place to roll over your funds to after the quit one job and move on to another but often times doing so limits their options down the road. Money invested inside a 401k stays inside a 401k. They may be invested in EXACTLY the same assets (mutual funds) as you can invest in with an IRA but the rules (laws) that the mutual fund companies have to follow are different and more complex inside the 401k.

IRA ROTH, Money Concepts for Life

ira contribution rules

How well do you know Roth IRAs? Here are five tough questions. Let’s see how you do…

1. I am 72 years young 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 limitations. 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 make $65,000. I am a participant in a 401(k) plan at work and put $5,000 into my own traditional IRA. Can I set up a Roth IRA?

Not in the tax year in question. You already put your regular contribution limit ($4,000) into your traditional IRA along with another $1,000 catch-up contribution which is allowed because you are over age 50. In your case, you have made the maximum IRA contribution. If you put less into your traditional IRA, you could put the difference, up to $5,000, into a Roth IRA.

3. I am single and my modified adjusted gross income for 2006 was $115,000. I have an existing Roth IRA. Can I make a contribution for 2006?

No, you made too much money. For 2006, if your modified adjusted gross income was less than $95,000, you could make a full contribution to your Roth IRA. The rules say if it was more than $110,000, you cannot make any 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 return, you could have made up to $150,000 and made a full Roth IRA contribution. If you were married and your modified adjusted gross income was over $160,000, no contribution would have been possible. For incomes falling between these numbers, a partial contribution determined by a formula could have been made.

Also note the income limits are now indexed; they will be higher in 2007 and beyond.

4. I have an existing traditional IRA and I want to roll it over to a Roth IRA. Is this possible?

It depends on four things: What year it is, how much money you make, your marital status and the type of income tax return you file. If you are talking 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’t convert your traditional IRA to a Roth. Period.

After 2009, these limitations don’t apply and you are good to go. Moreover, you can spread the income tax due on the rollover over tax years 2011 and 2012.

5. I am 55 and have had my Roth IRA for 3 years. I just went on disability and need to withdraw a good portion of it. Is the withdrawal taxable? And since I am not 59 1/2 do I have to pay the 10% penalty tax?

Your Roth IRA consists of two elements: your contributions and earnings. You can take out any amount up to your total contributions tax free.

In order for any earnings withdrawal to be tax free, the distribution has to be a “qualified distribution”. To be qualified, the distribution needs to be made after five taxable years starting with the first Roth contribution.

Then assuming this five year rule is satisfied, you can take out money tax free if you are over age 59 1/2, disabled, or to buy a first home for yourself, your spouse, children or grandchildren ($10,000 maximum). The rules go on to say if you die and your spouse elects to treat your Roth IRA as their own, any distributions would be qualified.

Distributions before age 59 1/2 are subject to a 10% premature penalty tax. However, this tax only applies if the distribution is includable in income. If you take out your contributions, these are not taxed.

In your case, you qualify for one of the exceptions: disability. So there is no 10% penalty tax.

These examples are based on my interpretation of the rules and should not be relied upon as tax advice. The complexities of distributions from any qualified plan or IRA underscore the necessity to consult with a qualified tax professional prior to making any withdrawal.

About the Author:

Robert D. Cavanaugh, CLU is a 36 year financial and estate planning veteran and author of the free newsletter, “The Estate Preservation Advisor”. To subscribe and get the free video, “How to Sell Your Life Insurance Policy for More Than the Cash Value”, go to http://theestatepreservationadvisor.com/freevideo.htm

Source – Roth Iras: Test your Knowledge

IRA Contribution Limits for 2009, 2010

ira deduction 2009

Question: 2008 IRA Contribution Deduction.?

I have an automatic investment plan through sharebuilder and I am a little confused on how to claim my Traditional IRA on my taxes. Can I claim the money I have invested through January 1,2009-April 15,2009? Thanks
I am using the turbo tax free edition to file my taxes.

Answer: The deadline is April 15. However, you must explicitly tell the company where you have the IRA which contributions are for which year so that they process them correctly. If you do not specifically tell that the company that the contributions made from January 1, 2009 - April 15, 2009 are for 2008, then they will assume that they are for 2009, and you will not be able to deduct them until next year.

Rockwall United 2009

Roth IRA rules limits

Question: Roth or traditional IRA help please?

My wife is a stay at home mom, she does not have any income. Can she still put money in an IRA? Are the rules different if we are talking about a traditional or Roth IRA? Does it matter that I (her husband) have a 401K at work? Are there annual limits? I guess I could put the money in my name, not so sure we want to do that. Any reference material out there? Thanks for any help.

Answer: Go to irs.gov and get publication 590.
As long as one of you works, you can put money into an IRA under her name.

Yes, there are annual limits (particularly because you *do* have a 401K).