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Roth IRA

The ceiling of a mosque.

Contributions

Tax Deductibility

Contributions to a Roth IRA are not tax-deductible.

Contribution Limits

You can contribute $5,500 to a Roth IRA for any year in which your adjusted gross income (AGI) is less than $114,000. If AGI falls between $114,000 and $129,000, your ability to contribute to a Roth IRA is phased out gradually. Individuals with an AGI higher than $129,000 may not contribute to a Roth IRA.

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Income Limits (AGI) for contributing to a Roth IRA
Full contributions below: Contributions phased out up to:
Single Filers
2014 $114,000 $129,000
2015 TBD TBD
Joint Filers
2014 $181,000 $191,000
2015 TBD TBD

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Note that income limits may in some cases be circumvented by first contributing to a traditional IRA and subsequently converting to a Roth IRA. Please ask a Saturna retirement specialist for details.

Spousal Considerations

If you are married and your spouse either earns no income, or elects to be treated as having no taxable income for the year, you may make contributions to a separate Kay Bailey Hutchison Spousal Roth IRA under your spouse's name. You may contribute up to $5,500 to your spouse's Roth IRA in addition to the $5,500 you may contribute to your own Roth IRA. Contributions to your Roth IRA and your spouse's Roth IRA may not exceed 100% of compensation or $11,000, whichever is less.

Married couples filing joint tax returns may contribute to a Roth IRA as long as their combined AGI is $181,000 or less. If your AGI falls between $181,000 and $191,000 your ability to contribute to a Roth IRA is phased out.

Contributing to a Saturna IRA

All contributions to your Saturna IRA must be made in cash. Securities or other assets cannot be contributed to an IRA but may be converted to cash and then contributed. No part of your contribution may be invested in life insurance contracts or mixed with other property. Exceptions apply to certain rollover contributions.

Time of Contributions

You may make Roth IRA contributions at any time up to and including the due date for filing your tax return (usually April 15), not including extensions. Note that unless you specify otherwise, we will code contributions for the year in which we received them.

Eligibility

Contributions are allowed as long as you have taxable compensation within certain limits (please see chart above).

Distributions

Method of Distribution

You have several choices for payment of distributions from your IRA. You may change the method of distribution after payments have begun, so long as the minimum distribution requirements are satisfied.

  • A lump sum payment of your entire account
  • Monthly, quarterly or annual payments for a period not exceeding your life expectancy or the combined life expectancy of you and your spouse or designated beneficiary
  • A lump sum payment of part of your account, with the balance either to be paid in installments or used to purchase an Individual Retirement Annuity

Age of Withdrawal

You may withdraw contributions (not earnings) tax-free at any age. Once you are over the age of 59½ and have established your Roth IRA for five years or more, you may withdraw contributions and earnings tax-free.

There is no age at which you must begin taking required minimum distributions.

Tax on Withdrawals

Once past age 59½, all withdrawals from a Roth IRA established for more than five years are tax-free. The earnings will be subject to regular income taxes if you have not held your account for more than five years. In such an instance, if you do not want tax withheld on your withdrawal, you must notify Saturna in writing. This is typically done by completing an IRA Distribution Form and returning it to Saturna. IRS regulations require Saturna to withhold 10% of any taxable Roth IRA distributions which total over $200 in a calendar year.

Early Withdrawals: Exemptions and Penalties

The right to withdraw earnings from a Roth IRA before age 59½ is restricted. With all early withdrawals of earnings, you must add the amount of the early withdrawal to your gross income. You may withdraw your contributions at any time, tax-free.

Penalties on early withdrawals

In addition to being taxable gross income, accumulated earnings withdrawn before reaching the age of 59½, regardless of how long your Roth IRA has been established, generally will be subject to a 10% penalty tax.

Exemptions from Penalties

There are situations in which early withdrawal penalties do not apply. Ordinary income tax on the early withdrawal, however, will still apply to earnings. Exemptions from penalties for early withdrawal are the same for Roth and Traditional IRAs with a few exceptions. Please see the List of Exemptions.