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IRAs (Individual Retirement Accounts)

A Tax-Free Way to Save: the Roth IRA


IMPORTANT NOTE:
See the section Roth IRA Conversions to learn about Roth IRA conversions that may be available to you even if you do not meet the criteria for a Roth IRA.

IRAs (Individual Retirement Accounts) are probably the most widely recognized tax-advantaged plans. These simple to establish accounts allow tax-deferred accumulation until distribution. The Roth IRA allows tax-free accumulation and withdrawals for those eligible to establish the account. You can establish an IRA whether or not you are covered by any other retirement plan.

The Roth IRA allows you to save money on a tax-free basis, provided you meet the eligibility requirements and the holding period rules.

The Roth IRA allows for non-deductible contributions up to $6,000 in 2020 (Same as 2019), no matter what your age (provided you have earned income) and presents an opportunity to receive tax-free income when the funds are withdrawn. If you are age 50 or older, you can contribute a total of $7,000 to a Roth IRA.

2020 Roth IRA Income Limits
Filing Status Modified AGI Contribution Limit
Married filing jointly or qualifying widow(er) Less than $196,000 $6,000 ($7,000 if you're age 50 or older
  $196,000 to $205,999 Reduced
  $206,000 or more Not eligible 
Single, head of household, or married filing separately (and you didn't live with your spouse at any time during the year) Less than $124,000 $6,000 ($7,000 if you're age 50 or older
  $124,000 to $138,999 Reduced
  $139,000 or more Not eligible 
Married filing separately (if you lived with your spouse at any time during the year) Less than $10,000 Reduced
  $10,000 or more Not eligible

 

The Roth contribution limit is also reduced for amounts contributed to a traditional IRA.

Tax-free, penalty-free distributions of appreciation or earnings may be made from a Roth IRA if held for at least five years and if made on or after age 59½, because of death or disability, or for "first-time homebuyers" subject to a $10,000 lifetime limit.

SUGGESTION: Contributions (not appreciation or earnings) to a Roth IRA can be withdrawn at any time, tax-free and penalty free.

*Investment and insurance products and services are offered through INFINEX INVESTMENTS, INC. Member FINRA/SIPC. BancorpSouth Wealth Management is a trade name of BancorpSouth Bank, a division of Cadence Bank. Infinex and the bank are not affiliated. Products and services made available through Infinex are not insured by the FDIC or any other agency of the United States and are not deposits or obligations of nor guaranteed or insured by any bank or bank affiliate. These products are subject to investment risk, including the possible loss of value.

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