Roth IRA is a non-traditional form of Individual Retirement Account created in 1998 (Public Law 105-34) sponsored by US Senator William Roth of Delaware. The main advantage of a Roth IRA is its tax structure:
1) Contributions are not tax-deductible.
2) Withdrawals are tax-free.
3) Transactions within the Roth IRA (interest, dividends, capital gains) are not-taxable.
Contributions to Roth IRA based on Modified Adjusted Gross Income (MAGI)
Contributions to a Roth IRA are limited. For 2008 Roth IRA contributions are limited to $5,000 for those individuals age 49 and below, $6,000 for those above the age of 50. Starting in 2009, contribution limits will increase in $500 increments based on inflation. Contributions are based on the Taxpayer’s Modified Adjusted Gross Income (MAGI). Ranges for 2008 are:
1) Single filers: Up to $101,000 of MAGI to qualify for the full $5,000 contribution $6,000 if you are over the age of 50, and partial contribution for MAGI between $101,000 to $116,000.
2) Joint filers: Up to $156,000 of MAGI for the full contribution and partial contribution for MAGI between $159,000 and $169,000.
Cons of a Roth IRA, traditional IRA, 401k
What’s wrong with Roth IRA and other traditional IRAs and 401Ks? Qualified contributions are “peanuts” for those of us in high income tax brackets. Contribution limitations are too restrictive. There are countless complex rules to qualify, withdrawals are too restrictive, transactions are too restrictive, and for most of us – it’s financially too risky when pegged to the ups and downs of the stock-market, the housing bubble, the declining dollar, and the rate of inflation.
Pros of a Roth IRA
What’s good about Roth IRA is that withdrawals are tax-free. Once the account is “seasoned” meaning that the account must be in existence for a minimum of 5 years, withdrawals after attaining your age 59 1/2 or the owner is disabled, are considered qualified and tax-free.
Best IRA retirement plan-Roth on ROIDS™
What’s superior to a Roth IRA? An infinite Roth IRA – a Roth on ROIDS™ (Roth on steROIDS™). There are no contribution limitations, no complex rules in order to qualify, your money never goes backwards (no loss of market risk, no ups and downs with the stock-market), your transaction interest, dividends, and capital gains accumulate tax-free, and when correctly structured distributions are tax-free. For those of us in the higher tax brackets it’s one of the last tax-free strategies in the face of diminishing IRS loopholes.
Infinite Roth IRA & Cash Value Life Insurance (IRA Insurance)
The “infinite Roth” is Cash Value Life Insurance. There are No limitations on the amount you can fund into a cash value life insurance. No complex rules to qualify. You may fund with $20,000; $30,000.00; $100,000 per year and higher. The only limitations are your insurability and the size of your pocketbook it’s a Roth on ROIDS™. The primary financial goal is tax-free growth and tax-free distributions; the secondary goal is the life insurance death benefit.
For years and years, I hated insurance sales people where the word “no” meant I’ll call back tomorrow, and tomorrow, and tomorrow. Finally, I have come to the conclusion that insurance has a place within our tax-advantaged investment horizon. Appropriately positioned, it’s the last tax-free Loophole. Insurance companies do not pay income taxes. Investments within the insurance company are not taxed (think of it like a safe-deposit box inside the insurance company, much like your safe-deposit box inside your bank), and with new insurance products, they have convinced me to take another look, sure enough, it worth your consideration: tax-free growth, tax-free distributions, and if suitably prearranged –tax-free death benefit.
This statement is required by IRS regulations (31 CFR Part 10, §10.35): Circular 230 disclaimer: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. federal tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.
