Roth Individual Retirement Account (ira)
Definition of "Roth individual retirement account (ira)"
Separate account created by the Tax Relief Act of 1997 and named after Senator William Roth Jr. of Delaware. A working individual may contribute up to 100% of compensation or $2000. The lesser amount applies for each taxable year; and, the contribution must be made by April 15 (or the tax filing deadline) of the following year. A nonworking spouse can contribute up to $2000. These contributions are subject to compensation limits (not included as compensation is income received from pensions, annuities, or as deferred compensation) for the adjusted gross income (AGI) in the following manner: (1) single individuals with an AGI of less than $95,000 may contribute up to $2000; (2) married individuals filing a joint income tax return with an AGI less than $150,000 may contribute up to $2000; (3) partial contributions may be made by single individuals with an AGI between $95,000 and $110,000 and by married individuals with an AGI between $150,000 and $160,000; and, by married individuals filing separately with an AGI of less than $10,000. These contributions are not deductible for federal income tax purposes. The funds once contributed grow on a tax-free basis. Tax-free withdrawals from this IRA may be made after it has been in existence for at least five years and the individual has reached at least age 59'A. If death or permanent disability occurs, tax-free withdrawals can also be made. Tax-free withdrawals up to $10,000 are also permitted for the purchase of a first home. Funds may be withdrawn for educational purposes subject to the payment of income tax, but there is no 10% penalty paid, as is the case with the traditional IRA. There is no maximum age by which the individual must start taking distributions as there is at the age of 70'A with the traditional IRA. Even though contributions are not tax-deductible, these contributions can be withdrawn tax-free at any time while the earnings accumulate on a tax-deferred basis after age 59, provided the funds have been in the account for at least five years. Conversions from a traditional IRA to a Roth IRA may be made provided the IRA owner has an AGI of $100,000 or less. Upon conversion to a Roth IRA, income tax is payable on the taxable portion of the amount converted from the traditional IRA (earnings and deductible contributions). The amount converted from a traditional IRA to a Roth IRA is subject to a 10% tax penalty if withdrawn within five years of the conversion.
Popular Insurance Terms
Insurer's total payments resulting from a claim, including all related expenses, less any recoveries from salvage, reinsurance, and the exercise of subrogation rights or other rights ...
Statements by an insurance applicant concerning personal health history, family health history, occupation, and hobbies. These statements are required to be substantially correct; that is, ...
Policy purchased by an insured from an insurer in another state. This insurer is not licensed in the state where the insured's risk is located. ...
Loss of income resulting from the damage or destruction of a person's property or a business's property. For example, if a store is damaged by fire and is unable to sell its inventory to ...
Coverage for an insured firm if its business debtors fail to pay their obligations. The insured firm can be a manufacturer or a service organization but it cannot sell its products or ...
Federal legislation requiring employers with traditional health plans to also provide an HMO to its employees. The act also makes it mandatory for employers to contribute as much to the HMO ...
Addition to a personal automobile policy (pap) that covers an insured who is involved in a collision with a driver who does not have sufficient liability insurance to pay for the damages. ...
Coverage purchased by employers in order to limit their exposure under self insurance medical plans. This coverage is available in two types: Specific stop loss Coverage is initiated when a ...
Measure showing how much life insurance an agent has lost through replacement. It is expressed as a percentage of number of policies, face amount, or premium volume. ...
Have a question or comment?
We're here to help.