5 Reasons to Choose a Payroll Roth IRA Date Presented by: AC: 21395-0514-7233 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.
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contributions Paycheck Contributions (after tax) Investments are tax-deferred Tax-Free Withdrawals 1 1 Earnings may be withdrawn tax- and penalty-free if you have owned a Roth IRA for at least a five-year period, as defined by the IRS, and have a qualifying event, including age 59 ½, a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
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
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
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
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
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
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 www.icmarc.org/whichira. For more information, see IRS Publication 590. Confidential and Proprietary 8
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
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 www.icmarc.org/guidedpathways 10
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
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 www.icmarc.org/ira Have an existing account? Increase your contributions Can open and contribute to IRA for spouse even if he/she is not earning income www.icmarc.org/iraspouse 12
Questions? THANK YOU Need a hand? Contact your ICMA-RC representative 13