What is a Roth IRA?
A Roth IRA allows only nondeductible contributions, but features tax-free withdrawals for certain distribution reasons after a five-year holding period. The term ''tax-free" means free from federal income taxes.

Am I eligible for a Roth IRA?
There are two requirements for eligibility to contribute to a Roth IRA: You must have earned income (or your spouse must have earned income) and your modified adjusted gross income cannot exceed certain limits (see tables below).

How much can I contribute each year?
You may contribute any amount up to the lesser of 100% of your earned income or the maximum contribution amount, if your modified adjusted gross income is within prescribed limits. These prescribed limits for contribution are described in the tables below.

Modified Adjusted Gross Income Table

Maximum Contribution Amount Table

The maximum contribution amount is the aggregate amount that you can contribute to any Roth and/or Traditional IRA in a given year. For example, if you are younger than age 50 and you contribute $500 to a Traditional IRA for this year, you can only contribute $4,500 to a Roth IRA.

The Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001 increased the maximum contribution amount, as shown in the following chart:

CATCH-UP CONTRIBUTION Table

To make up for lost retirement savings, EGTRRA also added ''catch-up" contribution ability for anyone who reaches age 50 or older by the end of the  taxable year. The chart below shows these additional amounts, which will increase the minimum contribution amount for Roth and Traditional IRA owners who are age 50 or older.

Do I pay taxes on my earnings?
No, provided you take the earnings as part of a qualified distribution. That's the best part of the Roth IRA. Unlike a Traditional IRA, you cannot take a tax deduction for any of the contributions that you make to a Roth IRA. However, when you are ready to make a withdrawal, you pay no taxes on any of the earnings that your contributions have generated.


What is a qualified distribution?
In order for earnings to be tax-free, your Roth IRA must be established for at least five years. This period begins with the tax year for which your first contribution is made. After that, any earnings you withdraw as a qualified distribution are income tax-free and penalty tax-free. Qualified distributions include those:

• Made on or after the date you attain age 59.5
• Made to your beneficiary (or your estate) upon your death,
• Attributable to your being disabled, or
• Qualified first-time home-buyer distributions (up to $10,000).
   

Does the 10% Premature Distribution Tax apply if I withdraw my money before Age 59.5?
The 10% penalty tax does not apply to earnings you withdraw when you take any of the qualified distributions listed, above. The 10% penalty tax may also be waived for other reasons, but income taxes on any earnings will apply. Distributions that are subject to taxes on any earnings withdrawn without penalty include:

• Substantially equal periodic payments,
• Eligible medical expenses in excess of 7.5% of your adjusted gross income,
• Medical insurance premiums for eligible unemployed individuals,
• Qualified higher education expenses,
• Distributions taken within the first five years for turning age 59.5, death, disability, or first-time home purchase, and
• Distributions paid directly to the IRS due to IRS levy

Distributions taken for an unqualified reason are subject to both taxes and a 10% penalty tax on withdrawn earnings.


What if I need access to my money now?
With Roth IRAs, you can always withdraw your principal income tax-free and penalty tax-free for any reason. Original contribution amounts are returned first for nonqualified distributions. Such contributions are not subject to taxation, or the 10% premature distribution penalty tax, when distributed.


When do I have to start taking distributions from my Roth IRA?
Another advantage of Roth IRAs over traditional IRAs is that they are not subject to Required Minimum Distributions at age 70.5. You never have to take distributions from your Roth IRA.


What happens in the event of my death?
Your designated beneficiary(ies) will receive the balance in your Roth IRA. Distributions to your beneficiary(ies) will be made in accordance with the IRA agreement.


Can I move funds from a Traditional IRA to a Roth IRA?
The law allows single or joint income tax filers with a modified adjusted gross income of $100,000, or less, to convert their traditional IRAs into Roth IRAs. For married taxpayers filing joint returns, the $100,000 limit for conversion eligibility applies to the couple's joint modified adjusted gross income. A married individual who files a separate return is not eligible to convert. (Specific rules may apply in this case; please seek professional tax or legal guidance.) The amount converted will be subject to income taxes; however, the funds will not be subject to a 10% premature distribution penalty tax.


What is the contribution deadline for funding a Roth IRA?
You can open and fund a Roth IRA any time between January 1 and April 15 of the following year.


How do I open a Roth IRA?
Call one of our IRA representatives at (707) 449-4000 or (800) 877-8328. They will explain the nature of these accounts in more detail, and help you complete the forms necessary to establish your Roth IRA.