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 Funds may be withdrawn for educational purposes subject to the payment of income tax, but there is no 10% penalty paid, as is the case with the traditional IRA.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 Even though contributions are not tax-deductible, these contributions can be withdrawn tax-free at any time while the earnings accumulate on a tax-deferred basis after age 59, provided the funds have been in the account for at least five years.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
Quantitative measurement of the total costs (losses, risk control costs, risk financing costs, and administration costs) associated with the risk management function, as compared to a ...
Net cost of insurance with no markup to cover an intermediary's profit or expenses. An intermediary, such as a broker, sells an insurance product net; that is, there is no loading for his ...
Arrangement in health insurance to discourage multiple payment for the same claim under two or more policies. When two or more group health insurance plans cover the insured and dependents, ...
Salaries plus commissions plus overhead expenses plus office rent plus fees charged for memberships in industry associations and bureaus plus guaranty association assessments plus taxes ...
Under Section 1035 of the Internal Revenue Code, stipulation that the exchange of one life insurance policy for another life insurance policy will generally not result in a recognized gain ...
Automobile purchased or leased by the insured or the insured's spouse that is in addition to the insured or the insured spouse's present car as covered under the personal automobile policy ...
Recording and presentation of financial statements, such as the annual statement, by the insurance company. Financial reporting statements are used by the State Insurance Commissioner in ...
Technique of estate planning under which an estate is divided into two parts and taxed at a lower rate rather than remaining as a whole and taxed at a higher rate. This division may be ...
Model state law of the NAIC that requires the insurance agent who is replacing the policy to: give the policyholder a replacement notice; forward a signed copy of the replacement notice to ...
Have a question or comment?
We're here to help.