The CamaPlan Roth IRA
The Roth IRA was created by the Taxpayer Relief Act of 1997 to allow workers to contribute post-tax dollars to their retirement savings account. Roth IRA rules are similar to those of a Traditional IRA retirement account, with the primary difference being that contributions to a Traditional IRA are tax-deductible, and Roth contributions are not; they are taxed at the taxpayer’s current marginal tax rate. For those who anticipate being in a higher tax bracket in retirement, paying the income tax at the time a contribution is made can present a tax advantage at the time of distribution. Another significant difference between the Roth IRA individual retirement account and a Traditional IRA retirement plan is that income earned from a Roth may be withdrawn tax-free after age 59 ½. For most individuals, the Traditional IRA immediate tax savings equal paying higher taxes overall on distributions in retirement. With a CamaPlan self-directed Roth IRA, investors have the freedom to diversify their portfolios beyond the typical mutual funds and stocks into alternative investment options such as real estate, mortgage notes, personal finance loans, and precious metals. Discover how your retirement savings can grow faster when you contribute funds up to the annual Roth IRA contribution limits each calendar year and invest in high-yield assets. Contact CamaPlan today to learn more about saving for retirement with self-directed Roth IRA retirement accounts and prepare to retire comfortably.
Eligibility and Basic Facts
Roth IRA eligibility depends on several factors, including income limits and earnings. These are the basics of a Roth individual retirement account:
- Open to all ages (no upper age limit of 70 ½ as with a Traditional IRA).
- You or your spouse must have earned enough income to fund the amount of the contribution.
- There is an income cap for Roth IRA eligibility. For 2013 a higher contribution limit is phased
in to account for inflation; the new limits are adjusted gross income (AGI) of less than:
- $188,000 for married filing jointly or widowed
- $127,000 for single, head of household, or married filing separately (if you did not live with
your spouse at any time during the year)
- $10,000 married filing separately and did live with spouse at any time during the year
- Taxpayers who are active participants in company sponsored retirement plans (such as 401(k)s)
may only be eligible to make partial contributions. If you are not eligible to make a full
contribution, a Roth IRA calculator can help you determine your partial contribution. For
some individuals, it is most advantageous to contribute up to the combined maximum
contribution limit split between a Traditional and a Roth IRA. Your certified financial planner
or tax professional can advise you on how Roth IRA rules apply to your specific situation.
Benefits of Roth IRAs
The Roth IRA has proved to be an individual retirement account that is favored by taxpayers since its inception. Although there are not the immediate tax savings with a Roth as there are with a Traditional IRA, the long term tax and penalty regulations have made them very popular. One of the greatest appeals of Roth retirement plans is that your money grows in your retirement account tax-deferred, and it may be withdrawn tax and penalty free after age 59 ½. Withdrawals from a Traditional IRA, by contrast, are subject to the same income tax rate as the contributions will be when they are withdrawn. The lower capital gain tax that applies to certain types of long-term investments does not apply to Traditional IRAs. Roth IRA contribution limits, while technically the same as those for a Traditional IRA, are effectively higher because of the tax-free growth of earnings. Your money can also keep growing in a Roth IRA retirement account for as long as you like, because there are no mandatory distributions in retirement. By contrast, regular withdrawals from a Traditional IRA must start by age 70 ½. In fact, if you do not need the income in retirement, you are free to keep the money in your Roth account to leave to your heirs. Your tax adviser can help you compare estate tax ramifications of a Roth IRA withdrawal as compared to other types of savings accounts. Another difference between contributions to a Traditional IRA and a Roth is that funds for certain types of expenditures (such as a first time home purchase) may be withdrawn tax-free and without an early withdrawal penalty. Call CamaPlan for a free consultation to learn more and to start on the path to financial freedom.
Rollovers, Conversions, and New Accounts
Once you have reviewed a Roth IRA calculator and are ready to start investing in your future, all it takes is a few simple steps. These are some options for opening a CamaPlan Roth IRA individual retirement account:
- Rollover from an existing retirement plan like a 401(k), pension, or make a Roth IRA withdrawal from another current account.
- Convert a Traditional IRA to a Roth. For those who exceed income limits to contribute to a Roth, it may be possible to use a conversion as a workaround or “back door” method of moving funds into a Roth. The individual contributes to a Traditional IRA (which has no income limit) and then immediately converts it to a Roth. The investor may withdraw from the Roth penalty-free once a five year “seasoning” period has passed. Be certain to discuss all potential tax scenarios with your financial adviser.
- Open a new CamaPlan retirement plan account with a cash contribution.
If you do not meet Roth IRA eligibility requirements or you anticipate having a lower tax rate in retirement, a CamaPlan consultant can help you determine which type of self-directed IRA will fit your needs and help you meet the financial goals for your retirement plans. As with any of our self-directed accounts, you can invest in a myriad of alternative assets such as gold, real estate, or private loans, as well as more conventional mutual fund, stock, or bond investments.
Start Growing Your Wealth Today
CamaPlan was founded by investors, for investors. Our Pennsylvania-based company makes no money selling financial products, so we do not have the conflict of interest that is common among other IRA custodians. CamaPlan uses a clear account based fee structure, with no other commissions or hidden administration costs. We handle the paperwork and educate you about IRS regulations and Roth IRA rules, but you are free to make the investments of your choice, with very few restrictions. It is our belief that individuals have the right to autonomously control their own money and that an educated, self-reliant investor is the best person to make decisions about his or her own financial future. Our Cama Academy provides free educational webinars and workshops to educate individuals about self-directed IRA real estate investments, using a self-directed IRA to buy gold and silver, private lending, investing in mortgage notes, and many other investments. Contact CamaPlan today to open a self-directed Roth IRA and start growing your wealth.