5 Reasons to Choose a Payroll Roth IRA

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1 5 Reasons to Choose a Payroll Roth IRA Date Presented by: AC: ICMA-RC does not provide specific tax advice. This presentation is the property of ICMA-RC and may not reproduced or redistributed in any manner without permission.

2 What is a Payroll Roth IRA? Roth IRA flexible savings vehicle with tax advantages Payroll Roth IRA automatic, convenient paycheck contributions Paycheck Contributions (after tax) Investments are tax-deferred Tax-Free Withdrawals 1 1 Earnings may be withdrawn tax- and penalty-free if you have owned a Roth IRA for at least a five-year period, as defined by the IRS, and have a qualifying event, including age 59 ½, a first-time home purchase, disability or death. Otherwise, ordinary income and penalty taxes may apply. See IRS Publication 590. Confidential and Proprietary 2

3 1 Diversify Your Savings What are you saving for? Additional retirement income Health-care costs Travel House College Emergencies Gifting, inheritance for loved ones 3

4 2 Tax-Free Benefits Tax-free withdrawals, including earnings, if 1. You have owned a Roth IRA for 5 years 1 and 2. You are over age 59½ or due to qualifying first-time home purchase, disability 2 Diversify your taxes in retirement a source of tax-free income to offset other taxable income 1 5-year holding period as defined by the IRS 2 Otherwise, income and penalty taxes may apply 4

5 3 Flexibility Stop, start contributions any time Contribute as little as $10 per pay period Withdraw contributions any time, no taxes/penalties RMDs do not apply* The more you contribute and the longer you delay withdrawals, the more potential tax benefits * Inherited Roth IRA assets are subject to Required Minimum Distributions (RMDs) 5

6 4 Diversify with More Investment Options Select funds that complement other retirement investments Build separate portfolio of individual stock, bond funds Keep it simple pick a diversified balanced or asset allocation fund 6

7 5 Complements Other Retirement Accounts Complements your employer s 457 plan through: Tax-free earnings No RMDs Flexible withdrawals It s not either or decision save to both View alongside your other ICMA-RC accounts on your statement and online 7

8 Income Eligibility Rules Contribution Single Filers Income* Married Joint Filers Income* Full < $116,000 < $183,000 Partial $116,000 $131,000 $183,000 $193,000 None > $131,000 > $193,000 * 2015 tax year limits. Based on your IRS modified adjusted gross income. To view 2014 limits, visit For more information, see IRS Publication 590. Confidential and Proprietary 8

9 Contribution Limit 2015 Tax Year Up to $5,500 $6,500 if age 50+* Applies to combined Roth + Traditional IRA contributions Based on income and tax-filing status Must have earned income from working Can contribute up to tax-filing deadline Mid-April 2016 for 2015 tax-year contributions * If you are age 50 or over as of the end of the year Confidential and Proprietary 9

10 Helping You Save>Invest>Retire For all your ICMA-RC retirement accounts How much should you save? What investments should you choose? Are you on track to reach your retirement goals? Learn about Guided Pathways 10

11 Aim to Gradually Increase How Much You Save Account value 20 years later $45,821 $11,336 $10 monthly increase made each year leads to over $34,000 in additional savings For illustrative purposes only. Actual returns may be higher or lower. Assumes $25 monthly contributions with no increase vs. a $10 annual increase and an effective average annual return of 6%, compounded monthly. Confidential and Proprietary 11

12 Consider these Next Steps Open an account. Two easy options 1) Mail/fax Application to ICMA-RC. Submit Payroll Authorization to your employer. 2) Go online Have an existing account? Increase your contributions Can open and contribute to IRA for spouse even if he/she is not earning income 12

13 Questions? THANK YOU Need a hand? Contact your ICMA-RC representative 13