Roth IRA

With a Roth IRA, you fund your account with after-tax dollars, so there are no immediate tax deductions for your contributions. And as with a Traditional IRA, any income earned compounds without taxes over time. Additionally, your distributions may be tax-free when you retire, if you meet certain requirements.

Tax-deferred vs. Potentially Tax-free Earnings

With a Roth IRA, any earnings grow tax-free. Unlike a 401(k) plan or a Traditional IRA, you will not be taxed when you begin to withdraw money from your account (assuming you’re 59 1⁄2 or older and have held the account for at least five years).¹ As you can see, you may accumulate more assets in a Roth IRA because of the additional tax benefits.

¹Please note that you may be able to withdraw money from your Roth IRA account penalty-free for any of the reasons indicated in the Penalty-free withdrawals section below.

A Roth IRA Might be Right for You if You...

You seek tax-free earnings and/or tax-free withdrawals.

You are looking to combine pretax growth in a 401(k)plan with after-tax growth in a Roth IRA.2

You don’t qualify for deductible contributions to a Traditional IRA.

You want to avoid mandatory distributions or are looking to contribute beyond age 70 1/2.

You are likely to be in the same or a higher tax bracket in retirement.3

²Income limits as well as marital status and tax filing status limits do apply.

³Based on current tax laws which could change.

Determining Your Eligibility

There’s no age limit on Roth IRA contributions, provided you have compensation^*. However, you will not be able to participate—or your contribution may be reduced—if you earn more than the income ceilings in the chart below:

^* Compensation includes salaries, wages, tips, commissions, bonuses and alimony, and earned income for self-employeds.

MAGI limits for Roth IRA contributions3

Tax Year	Single filer	Married filing jointly
2007
	Full Less than $99,000 Partial $99,000 to $114,000 No Contribution $114,000 or more	Full Less than $156,000 Partial $156,000 to $166,000 No Contribution $166,000 or more
2008
	Full Less than $101,000 Partial $101,000 to $116,000 No Contribution $116,000 or more	Full Less than $159,000 Partial $159,000 to $169,000 No Contribution $169,000 or more

Maximizing Distributions

Maximum contributions are the same as for Traditional IRAs, with the same catch-up contribution provisions for individuals over age 50.

Contribution Schedule3

Year	If you're under age 50	If you're over age 50
2007	$4,000	$5,000
2008*	$5,000	$6,000

^* After 2008 IRA contribution limits are subject to Cost of Living Adjustments (COLA). Limits are indexed for inflation in $500 increments, rounded to the lower increment.

Understanding the rules governing distributions

The money you accumulate in a Roth IRA has two components—the after-tax contributions you have made, which are never taxable, and any investment income you’ve earned on these contributions, which may be taxable under some circumstances. Generally, when you make a withdrawal, contributions are distributed first, then converted amounts (taxable conversion first, then nontaxable conversion amounts), then earnings.

Penalty-free withdrawals

Roth IRAs are meant to be long-term investments, offering the most attractive tax advantages to those who hold their investments until they reach age 59 1/2 and have had the account open for at least five years. For example, if you withdraw investments before you reach age 59 1/2, the portion of your withdrawal that comes from investment earnings will typically be taxed as ordinary income, and a 10% penalty will generally apply. Your original contribution will not be taxed. Roth IRA investors, however, can take penalty-free withdrawals for any of the same reasons listed for Traditional IRAs. However, distributions taken before the end of the 5-year period would be taxable on the earnings portion.

Tax-free distributions

Unlike a Traditional IRA, where distributions are taxed, distributions from a Roth IRA are withdrawn tax-free, assuming you are 59 1/2 or older and have held the account for at least five years.

No mandatory withdrawals

There are no required minimum distributions for Roth IRAs during your lifetime. However, if you pass away before withdrawing all the money in your Roth IRA, your beneficiaries will have to take required distributions, generally within five years (some exceptions may apply). If this situation arises, the beneficiary payouts will vary, depending on circumstances. Please consult your financial or tax advisor for more information.

³ Maximum amount contributed for any year is equal to the lesser of 100% of compensation not to exceed the annual contribution limit.