A Roth individual retirement account (IRA) is an investment account that allows you to contribute for your retirement. Contributions to a Roth IRA are made after taxes and then your contributions and earnings grow tax-free.
Roth IRA features:
Things to consider:
Roth IRAs offer you an opportunity to create tax-free income during retirement and avoid RMDs beginning at age 70½. Tax-free retirement income may be appealing if you have a traditional IRA or a 401(k) and want to diversify your tax situation in retirement or if you estimate being in the same or a higher tax bracket in retirement as you are today.
Contribution limits—2016 tax year:
Individuals who have earned income and their spouses, if married filing jointly, are eligible to contribute to a Roth IRA as long as their MAGI falls below certain limits.
For the 2016 tax year, you can make the following contributions to a Roth IRA:
With a Roth IRA, you can withdraw your contributions at any time, free of tax or penalty. Qualified distributions of earnings are income tax-free and penalty-free. Distributions are considered qualified after five years if you are at least age 59½ or as a result of death, disability, or for qualified first-time homebuyers.
If you take nonqualified distributions of earnings, you may owe income taxes and a 10% IRS penalty. There are a few exceptions that allow you to avoid the 10% penalty, which are:
Any tax or legal information on this website is merely a summary of our understanding and interpretations of some of the current income tax regulations and is not exhaustive. Investors should consult their tax advisor or legal counsel for advice and information concerning their particular situation. Wells Fargo Funds Management, LLC; Wells Fargo Funds Distributor, LLC; or any of their representatives may not give legal or tax advice.