Rosen Financial, Inc.Bradley J. Rosen, PresidentFinancial Professional1111 Lincoln RoadFourth FloorMiami Beach, FL 33139Phone: 786-276-2452Fax: 786-219-3331bradley.rosen@natplan.comwww.rosenfinancialinc.com

All about IRAs

August 01, 2014

An individual retirement arrangement (IRA) is apersonal retirement savings plan that offers specifictax benefits. In fact, IRAs are one of the mostpowerful retirement savings tools available to you.Even if you're contributing to a 401(k) or other plan atwork, you should also consider investing in an IRA.

What types of IRAs are available?There are two major types of IRAs: traditional IRAsand Roth IRAs. Both allow you to make annualcontributions of up to $5,500 in 2014 (unchangedfrom 2013). Generally, you must have at least asmuch taxable compensation as the amount of yourIRA contribution. But if you are married filing jointly,your spouse can also contribute to an IRA, even if heor she does not have taxable compensation. The lawalso allows taxpayers age 50 and older to makeadditional "catch-up" contributions. These folks canput up to $6,500 in their IRAs in 2014 (unchangedfrom 2013).

Both traditional and Roth IRAs feature tax-shelteredgrowth of earnings. And both give you a wide range ofinvestment choices. However, there are importantdifferences between these two types of IRAs. Youmust understand these differences before you canchoose the type of IRA that's best for you.

Traditional IRAsPractically anyone can open and contribute to atraditional IRA. The only requirements are that youmust have taxable compensation and be under age70½. You can contribute the maximum allowed eachyear as long as your taxable compensation for theyear is at least that amount. If your taxablecompensation for the year is below the maximumcontribution allowed, you can contribute only up to theamount you earned.

Your contributions to a traditional IRA may be taxdeductible on your federal income tax return. This isimportant because tax-deductible (pretax)contributions lower your taxable income for the year,saving you money in taxes. If neither you nor your

spouse is covered by a 401(k) or otheremployer-sponsored plan, you can generally deductthe full amount of your annual contribution. If one ofyou is covered by such a plan, your ability to deductyour contributions depends on your annual income(modified adjusted gross income, or MAGI) and yourincome tax filing status. You may qualify for a fulldeduction, a partial deduction, or no deduction at all.

What happens when you start taking money fromyour traditional IRA? Any portion of a distribution thatrepresents deductible contributions is subject toincome tax because those contributions were nottaxed when you made them. Any portion thatrepresents investment earnings is also subject toincome tax because those earnings were notpreviously taxed either. Only the portion thatrepresents nondeductible, after-tax contributions (ifany) is not subject to income tax. In addition toincome tax, you may have to pay a 10% earlywithdrawal penalty if you're under age 59½, unlessyou meet one of the exceptions.

Traditional IRAs--Tax Year 2014Individuals Covered by an Employer Plan

Filing status Deduction islimited if MAGIbetween:

No deduction ifMAGI over:

Single/Head ofhousehold

$60,000 -$70,000

$70,000

Married joint* $96,000 -$116,000

$116,000

Marriedseparate

$0 - $10,000 $10,000

* If you're not covered by an employer plan, butyour spouse is, your deduction is limited if yourMAGI is $181,000 to $191,000, and eliminated ifyour MAGI exceeds $191,000.

If you wish to defer taxes, you can leave your funds inthe traditional IRA, but only until April 1 of the year

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Prepared by Broadridge Investor Communication Solutions, Inc. Copyright 2014

These are the views of Forefield Inc., not the named Representative nor Broker/Dealer, and should not be construed as investment advice.Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however,we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professionalservices. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult yourFinancial Professional for further information. Securities offered through NPC OF AMERICA (NPCOA), NPC OF AMERICA in FL & NY, MemberFINRA/SIPC. Rosen Financial Inc., MDRT, Beacon Financial Group, and NPCOA are separate and unrelated companies.

following the year you reach age 70½. That's whenyou have to take your first required minimumdistribution from the IRA. After that, you must take adistribution by the end of every calendar year untilyour funds are exhausted or you die. The annualdistribution amounts are based on a standard lifeexpectancy table. You can always withdraw morethan you're required to in any year. However, if youwithdraw less, you'll be hit with a 50% penalty on thedifference between the required minimum and theamount you actually withdrew.

Roth IRAsNot everyone can set up a Roth IRA. Even if you can,you may not qualify to take full advantage of it. Thefirst requirement is that you must have taxablecompensation. If your taxable compensation is atleast $5,500 in 2014 (unchanged from 2013), youmay be able to contribute the full amount. But it getsmore complicated. Your ability to contribute to a RothIRA in any year depends on your MAGI and yourincome tax filing status. Your allowable contributionmay be less than the maximum possible, or nothing atall.

Roth IRAs--Tax Year 2014Filing status Contribution is

limited if MAGIbetween:

No contributionif MAGI over:

Single/Head ofhousehold

$114,000 -$129,000

$129,000

Married joint $181,000 -$191,000

$191,000

Marriedseparate

$0 - $10,000 $10,000

Your contributions to a Roth IRA are not taxdeductible. You can invest only after-tax dollars in aRoth IRA. The good news is that, if you meet certainconditions, your withdrawals from a Roth IRA will becompletely free from federal income tax, includingboth contributions and investment earnings. To beeligible for these qualifying distributions, you mustmeet a five-year holding period requirement. Inaddition, one of the following must apply:

• You have reached age 59½ by the time of thewithdrawal

• The withdrawal is made because of disability

• The withdrawal is made to pay first-timehomebuyer expenses ($10,000 lifetime limit fromall IRAs)

• The withdrawal is made by your beneficiary orestate after your death

Qualified distributions will also avoid the 10% earlywithdrawal penalty. This ability to withdraw your fundswith no taxes or penalty is a key strength of the RothIRA. And remember, even nonqualified distributionswill be taxed (and possibly penalized) only on theinvestment earnings portion of the distribution, andthen only to the extent that your distribution exceedsthe total amount of all contributions that you havemade.

Another advantage of the Roth IRA is that there areno required distributions after age 70½ or at any timeduring your life. You can put off taking distributionsuntil you really need the income. Or, you can leavethe entire balance to your beneficiary without evertaking a single distribution. Also, as long as you havetaxable compensation and qualify, you can keepcontributing to a Roth IRA after age 70½.

Choose the right IRA for youAssuming you qualify to use both, which type of IRAis best for you? Sometimes the choice is easy. TheRoth IRA will probably be a more effective tool if youdon't qualify for tax-deductible contributions to atraditional IRA. However, if you can deduct yourtraditional IRA contributions, the choice is moredifficult. Most professionals believe that a Roth IRAwill still give you more bang for your dollars in thelong run, but it depends on your personal goals andcircumstances. The Roth IRA may very well makemore sense if you want to minimize taxes duringretirement and preserve assets for your beneficiaries.But a traditional deductible IRA may be a better tool ifyou want to lower your yearly tax bill while you're stillworking (and probably in a higher tax bracket thanyou'll be in after you retire). A financial professional ortax advisor can help you pick the right type of IRA foryou.

Note: You can have both a traditional IRA and a RothIRA, but your total annual contribution to all of theIRAs that you own cannot be more than $5,500 in2014 ($6,500 if you're age 50 or older).

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