|GATEWAY INVESTMENTS, LLC|
390 Old Country Road
Garden City, NY 11530
|Basic Retirement Planning
A Roth individual retirement account (IRA) is a personal savings plan that offers
tax benefits to encourage retirement savings. You can contribute up to the lesser
of $6,000 in 2020 (unchanged from 2019), or 100% of your taxable compensation to a Roth
IRA. In addition, individuals age 50 or older can make an extra "catch-up" contribution
of up to $1,000 in 2019 and 2020. Contributions to a Roth IRA are not tax deductible,
but the funds grow tax deferred and distributions are tax free under certain conditions.
- You have taxable compensation (i.e., wages, self-employment income) during the year
of the contribution
- Your modified adjusted gross income (MAGI) for 2020 must be:
$124,000 or less for a full contribution if your tax filing status is single or
head of household (partial contribution allowed, up to MAGI of $139,000)
- $196,000 or less for a full contribution if your tax filing status is married filing
jointly or qualifying widow(er) (partial contribution allowed, up to MAGI of $206,000)
- $10,000 or less for a partial contribution if your tax filing status is married
filing separately and you lived with your spouse at any time during the year (full
contribution not allowed)
Note: These income ranges are for the 2020 tax year, and are indexed for
- Qualified distributions are tax free (and penalty free)
- You have flexibility in withdrawing your funds prior to retirement
- You are not required to take any distributions while you are alive
- Contributions can be made even if you are covered by an employer-sponsored retirement
- IRAs offer a wide range of investment choices
- $1,362,800 of IRA assets may be protected in the event of
bankruptcy under federal law [SEP IRAs, SIMPLE IRAs, and amounts rolled over to an IRA from an employer qualified plan or 403(b) plan, plus any earnings on the rollover, aren't subject to this dollar cap and are fully protected under federal law if you declare bankruptcy]1
- You receive no tax deduction when you make a contribution
- If a withdrawal does not qualify for tax-free status, the portion that represents
earnings is subject to federal income tax (and perhaps an early withdrawal penalty
if under age 59½)
- Special penalty provisions may apply to withdrawals of Roth IRA funds that were
converted or rolled over from a traditional IRA, SEP IRA, or SIMPLE IRA
- There is always the possibility that the law will change in the future
Variations from state to state
- States vary in their protection of Roth IRAs from creditors
- States may differ in their tax treatment of Roth IRAs
How is it implemented?
- Open a Roth IRA with a bank, financial institution, mutual fund company, life insurance
company, or stockbroker
- Select types of investments to fund the Roth IRA (e.g., CDs, mutual funds, annuities)
- Make contributions up to the due date of your federal income tax return for that
year (usually April 15 of the following year), not including extensions
1This amount is scheduled to be adjusted for inflation in April 2022.
|Securities, insurance and advisory services offered through Royal Alliance Associates Inc., member FINRA/SIPC. Gateway Investments, LLC is a marketing designation.
Royal Alliance Associates, Inc. does not provide tax, or legal advice. The information presented here is not specific to any individual's personal circumstances.
To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable—we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
This communication is strictly intended for individuals residing in the state(s) of AL, AZ, CA, CO, CT, DC, DE, FL, GA, ID, IL, ME, MD, MA, MI, MN, MS, MO, NV, NH, NJ, NM, NY, NC, OH, OK, OR, PA, PR, RI, SC, TX, VA and WI. No offers may be made or accepted from any resident outside the specific states referenced.
|Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2020.