Is a Roth IRA Annuity right for me?
Maryland Annuity Resource offer Roth IRA Annuities in Maryland, Washington D.C. and Virginia. Roth IRA’s have some unique features and we believe that income from a Roth IRA is a staple to any investment portfolio. It is important to understand all of the features and limitations that a Roth Ira can do for you.
A Roth IRA Annuity is an individual retirement account that offers Tax-free income in retirement. If you expect to be in a high tax bracket when you retire a Roth might be an option for you. There is no up-front tax deduction for Roth IRA contributions as there is with a traditional IRA however Roth distributions are tax-free when you follow the rules.
Every penny you stash in a Roth IRA is your money (not a tax-subsidized gift from the government) you can tap your contributions (but not your earnings) any time tax-free and penalty-free. There are however limitations if you choose an Annuity as an underlining investment so pay attention to the contract withdrawal features.
Roth IRA Annuities make sense if you expect your tax rate to be higher during retirement than your current rate. That makes Roth IRAs ideal savings vehicles for young, lower-income workers who won’t miss the upfront tax deduction. Those who choose a Roth IRA Annuity will also benefit from decades of tax-free, compounded growth. Please remember that inside annuities, once interest is credited, it cannot go down.
Roth IRA Annuities will also appeal to anyone who wants to minimize their tax liability in retirement as well as older, wealthier taxpayers who want to leave assets to their heirs tax-free. Anyone can contribute to a Roth IRA Annuity at any age as long as you have earned income from a job.
Who is eligible for a Roth IRA Annuity?
With Roth IRA’s there are income eligibility limits, if you make too much money, you cannot contribute to a Roth IRA. But with a median household income of about $50K most Americans qualify for Roth IRA contributions. For 2012, you can contribute the maximum $5K to a Roth IRA ($6K if you are age 50 or older) if you are single or the single head of a household and your modified adjusted gross income is less than $110,000. If you are married filing jointly, you can contribute the maximum amount to a Roth IRA if your income is less than $173,000. You may make a partial contribution to a Roth IRA if you are single and your income is between $110,000 and $125,000 or if you are married filing jointly and your income is between $173,000 and $183,000. You can’t contribute to a Roth IRA if your income is above those levels. Roth Ira’s are not for everyone, but if you meet the rquirement, it is also wise to consider annuities as their underlying invest vehicle.
Penalty Free Withdrawals for Roth IRA Annuities
While Roth IRA’s allow penalty free withdrawals for qualifying reasons, if your underlying investment vehicle is an annuity you need to understand that some contracts will have surrender charges for any withdrawals that exceed contract guidelines. Most contracts allow 10% per year after the first year. Some of the qualifying withdrawals could be to pay for college expenses, medical expenses that exceed 7.5% of AGI, paying for a home purchase up to 10K, or paying for a sudden disability.
Please make sure that your annuity carrier offers Roth IRA withdrawal features that match other traditional Roth IRA plans. Even if you place an annuity into a Roth IRA, it almost defeats the purpose of the tax deferral feature of annuities. However if you follow the rules, income and distributions from a Roth IRA are generally tax free.
We want to make sure you understand all of your options and thinking about a Roth IRA and even a Roth IRA Annuity can be daunting but we will help you in what ever avenue you choose to take.