Roth IRA

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Roth IRA

 (ī′är-ā′)
n.
A modified individual retirement account in which a person can set aside after-tax income up to a specified amount each year. Earnings on the account are tax-free, and tax-free withdrawals may be made after age 59 1/2 .

[After William Victor Roth, Jr. (1921-2003), US congressman.]
American Heritage® Dictionary of the English Language, Fifth Edition. Copyright © 2016 by Houghton Mifflin Harcourt Publishing Company. Published by Houghton Mifflin Harcourt Publishing Company. All rights reserved.

Roth IRA


n.
an individual retirement account in which investments are made with taxable dollars, but withdrawals are tax-free after age 59 1/2.
[1997; after William V. Roth, Jr., senator from Delaware]
Random House Kernerman Webster's College Dictionary, © 2010 K Dictionaries Ltd. Copyright 2005, 1997, 1991 by Random House, Inc. All rights reserved.
References in periodicals archive ?
Should an individual ever contribute to a nondeductible IRA? Many commentators believe nondeductible IRAs are a poor choice because the same funds invested outside the IRA would not generate taxable income until sold, could qualify for favorable capital gains treatment, and if held until death would receive a step-up in basis.
If a taxpayer maintains multiple IRAs, the cumulative amount of nondeductible IRA contributions is used in determining the portion of a withdrawal from any particular account that is nontaxable.
Nondeductible IRA Contributions and Subsequent Conversion
Greenberg suggested that if a woman can't contribute to a deductible IRA because of her income level or coverage by an employer-provided retirement plan, consider a nondeductible IRA. "You'll have to fund it with after-tax dollars and potentially pay taxes on withdrawals in retirement," she said.
These include records of income received; expense items, especially work-related expenses; home improvements, sales, and refinances; investment purchases and sales information; documents for inherited property; medical expenses; charitable contributions; interest and taxes paid; and records on nondeductible IRA contributions.
In the year an employee reaches age 70.5, the employee cannot make a contribution to a traditional IRA not even a nondeductible IRA contribution.
However, all the non-Roth IRAs owned by the taxpayer are treated as one IRA for purposes of determining the pro-rata taxable and nontaxable treatment of the converted amount, so an individual cannot simply elect to convert only his or her nondeductible IRA contributions, even if all the individual's non-deductible contributions are in one IRA.
* Traditional nondeductible IRA. Your contributions aren't deductible, but they grow tax-deferred and only part of your withdrawals are taxable.
Nondeductible IRA contributions create "basis" for the IRA owner.
Clearly, it would never be advantageous to invest nondeductible dollars, such as amounts one might contribute to a nondeductible IRA, if growth comprises the entire return on the investment.
All taxpayers may continue to make a nondeductible IRA contribution of up to the lesser of the dollar limit or 100% of compensation, to the extent that contributions to all IRA accounts (including Roth IRAs, discussed below) do not exceed the maximum annual limit in total.
Where a distribution is received from a traditional, nondeductible IRA, a pro-rata computation is made to determine how much of the distribution relates to the taxpayer's nondeductible IRA contributions and how much of it relates to the build-up of earnings inside the IRA.