Three Lesser-Known Rules regarding Roth IRAs

Retirement pic


As a principal & financial advisor with First Financial Tax Group in Boca Raton, Florida, Barry M. Kornfeld helps clients understand their retirement savings options. Barry Kornfeld’s clients often seek advice on Roth IRAs, which enable them to grow retirement savings in a tax-free savings system.

Roth IRAs enable account holders to deposit money without receiving an up-front tax deduction, which differentiates them from traditional IRAs. Here are three lesser-known Roth IRA rules you may not know about.

1. Shared contribution limit: The 2017 limit for IRAs is $5,500, which must be split among all traditional and Roth IRAs held by an individual. If you exceed this maximum value, you must pay penalty taxes until you correct the excess contribution.

2. Fewer limitations: Roth IRAs offer more liberties in several areas when compared with traditional IRAs. Roth IRAs require no minimum distribution, and you can contribute to them at any age. Roth IRAs also enable account holders to withdraw money tax free, as long as that money was deposited at least five years ago.

3. Income cap: Roth IRAs are not available to individuals whose modified adjusted gross income (MAGI) totals $132,000 or to married couples filing jointly whose MAGI totals $194,000. However, individuals who exceed these income limits may qualify for a Roth conversion. Because this may result in a higher tax bill, it is best to consult with a qualified tax or financial advisor before converting.

Many of Kornfeld’s clients utilize the 6% secured CLO note (co-lending opportunity) within their Roth IRA’s, effectively turning the 6% annual yield into a “tax free 6% annual yield”.


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