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Introduction to Roth IRAs 2023

A Roth individual retirement account (IRA) is a retirement savings option for clients looking for potentially greater tax savings than a traditional IRA. Contributions can be made at any age and are made post-tax. Earnings grow tax-free, and qualified withdrawals and distributions are free of federal income tax if certain requirements are met. Roth IRAs do not have required minimum distributions (RMDs), and qualified distributions are tax-free, after age 59 1/2.

A Roth IRA can be contributory, rollover, or spousal, and it can be funded from your own earned income, through conversions of traditional IRAs or qualified retirement plans (QRPs), through a rollover of Roth contributions to a 401(k) or QRP, or through a rollover from a Roth 401(k). Contact your tax advisor regarding any tax implications of conversion.

Key information related to a Roth IRA:

Deadlines

Contributions

Tax Ramifications

Income Limitations

Modified Adjusted Gross Income (MAGI) for tax year 2023 limited to:

Single

Married filing jointly

Married filing separately

Rollovers / Conversions

Withdrawals

Withdrawals of earnings are income-tax-free as long as the account holder is at least 59 1/2 and has had the account for at least five years (minimum holding period). Unlike traditional 401(k)s and IRAs, Roth IRAs don’t require the account holder to take minimum distributions. However, if converting to a Roth IRA after RMD age, they still have to take one final RMD from their traditional retirement account for the conversion year.

With a Roth IRA, the account holder may be able to take an early distribution on an exception basis without paying the early distribution penalty. Early distribution exceptions include but are not limited to:

Withdrawal Penalties

Distributions

Information is as of 6/26/2023 and is subject to change. The information has been obtained from sources we believe to be reliable; however, no guarantee is made or implied with respect to its accuracy, timeliness, or completeness.   It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.

Acumen Wealth Advisors, LLC® is a Registered Investment Adviser. Advisory services are only offered to clients or prospective clients where Acumen Wealth Advisors, LLC® and its representatives are properly licensed or exempt from licensure. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. No advice may be rendered by Acumen Wealth Advisors, LLC® unless a client service agreement is in place.