Get to Know: Roth IRAs

With investment losses mounting, the market does present some opportunities to make lemonade from the lemons you have been handed. There are great tax opportunities out there right now. One of these strategies might be converting your Tradtional IRA to a Roth IRA. If you have decreased income and losses, now could be the time to make those tax-exempt assets, tax-free assets. Here are some Roth IRA guidelines for 2009.

In 2009 Modified AGI limits for Roth IRA contributions increased. For 2009, your Roth IRA contribution limit is reduced (phased out) in the following situations.

· Your filing status is married filing jointly or qualifying widow(er) and your modified AGI is at east $166,000. You cannot make a Roth IRA contribution if your modified AGI is $176,000 or more.

· Your filing status is single, head of household, or married filing separately and you did not live with your spouse at any time in 2009 and your modified AGI is at least $105,000. You cannot make a Roth IRA contribution if your modified AGI is $120,000 or more.

· Your filing status is married filing separately, you lived with your spouse at any time during the year, and your modified AGI is more than -0-. You cannot make a Roth IRA contribution if your modified AGI is $10,000 or more.

Like regular IRAs, in 2009 there is no required minimum distribution for a Roth IRA. With the current market, it is a great time for many to consider a conversion from a traditional IRA to a Roth. When you convert a traditional IRA to a Roth IRA, the conversion is treated as a rollover. You can convert amounts from a traditional IRA to a Roth IRA in any of the following three ways.

· Rollover. You can receive a distribution from a traditional IRA and roll it over (contribute it) to a Roth IRA within 60 days after the distribution.

· Trustee-to-trustee transfer. You can direct the trustee of the traditional IRA to transfer an amount from the traditional IRA to the trustee of the Roth IRA.

· Same trustee transfer. If the trustee of the traditional IRA also maintains the Roth IRA, you can direct the trustee to transfer an amount from the traditional IRA to the Roth IRA.

Conversions made with the same trustee can be made by redesignating the traditional IRA as a Roth IRA, rather than opening a new account or issuing a new contract.

Roth IRAs have the same guidelines as traditional IRAs regarding when the money can be taken penalty free (no 10% penalty). Unless you have reached age 59½, a 10% penalty will be made on any distribution except for the following circumstances:

· You are disabled.

· You are the beneficiary of a deceased IRA owner.

· You use the distribution to pay certain qualified first-time homebuyer amounts.

· The distributions are part of a series of substantially equal payments.

· You have significant unreimbursed medical expenses.

· You are paying medical insurance premiums after losing your job.

· The distributions are not more than your qualified higher education expenses.

· The distribution is due to an IRS levy of the qualified plan.

· The distribution is a qualified reservist distribution.

· The distribution is a qualified disaster recovery assistance distribution.

· The distribution is a qualified recovery assistance distribution.

Today we have to make the best of this day and age of the market. Consider what a Roth IRA might do for you.

Andy Pulsfort
Investment Advisor
Mackey Advisors
www.CultivatingProsperity.com
859-331-7755
Andy@CultivatingProsperity.com