Roth IRA

Q. What are the basic differences between a Traditional IRA and a Roth IRA?
A. Traditional IRA contributions may be deductible and your assets grow on a tax-deferred basis. This means that you postpone paying taxes until you withdraw money from your IRA. Roth IRA contributions are not deductible and assets grow on a tax-free basis. This means that, if your account is open for 5 years and you are at least 59½, you will not pay taxes when you withdraw money.

 

Q. Who is eligible to contribute to a Roth IRA?
A. Anyone who has earned income that does not surpass the IRS Modified Adjusted Gross Income (MAGI) limit.

 

Q. How much can I contribute to my Roth IRA each year?
A. It depends on your tax year, tax filing status, MAGI and age. See the tables below.

Tax Year 2008: Contribution Limits
Tax Filing Status	MAGI	Less than 50 Years Old	Age 50 and Older
Single	< $101,000	$5,000	$6,000
	$101,000– $116,000	Pro-rata contribution of $5,000	Pro-rata contribution of $6,000
	$116,000+	No contribution permitted	No contribution permitted
Married and Filing Jointly	< $159,000	$5,000	$6,000
	$159,000– $169,000	Pro-rata contribution of $5,000	Pro-rata contribution of $6,000
	$169,000+	No contribution permitted	No contribution permitted

Tax Year 2007: Contribution Limits
Tax Filing Status	MAGI	Less than 50 Years Old	Age 50 and Older
Single	< $99,000	$4,000	$5,000
	$99,000– $114,000	Pro-rata contribution of $4,000	Pro-rata contribution of $5,000
	$114,000+	No contribution permitted	No contribution permitted
Married and Filing Jointly	< $156,000	$4,000	$5,000
	$156,000– $166,000	Pro-rata contribution of $4,000	Pro-rata contribution of $5,000
	$166,000+	No contribution permitted	No contribution permitted

 

Q. Can I make a contribution and designate it for the prior tax year?
A. Yes, if it is made by April 15th.

Q.  I am under 50 years old. Can I contribute $4,000 to my Roth IRA and $4,000 to my Traditional IRA?
A. No. However, if you’d like, you can contribute to a Roth IRA and Traditional IRA as long as the total contribution to both IRAs does not exceed $4,000 for tax year 2007 and $5,000 for tax year 2008.

Q. Is there an investment minimum?
A. Yes. It is $2,000 per Fund.

Q. Is there a custodial fee?
A. Yes. If your IRA balance is less than $10,000, there is a charge of $15 per year (per IRA type).

 

Conversions

Q. Can I convert my Traditional IRA to a Roth IRA?
A. Yes, as long as your MAGI – whether single or married – does not exceed $100,000. Also, if you are married, you must file your taxes jointly.

 

Q. Do I add the conversion amount to my MAGI when determining whether or not I am under the $100,000 threshold?
A. No, your MAGI is determined before including income as a result of the conversion.

 

Q. If I convert, will I owe income taxes and a 10% penalty tax?
A. You will owe income taxes but not a 10% penalty tax. See IRS Form 8606 for more information (free upon request by calling 1-800-TAX-FORM or by going to www.irs.gov).

 

Q. How do I convert my Sit Traditional IRA to a Sit Roth IRA?
A. Call us for an IRA Conversion Form or visit our Forms Library

 

• Printable Roth IRA Q&A