Maine Roth IRA

A Maine Roth IRA may be your key to a more prosperous, secure lifestyle after you retire. Unlike distributions from other retirement plans, like the traditional IRA, your withdrawals from a Maine Roth IRA may not be subject to income tax if you meet the qualified distribution requirements. To qualify for tax free distributions, you must be at least 59 1/2 and have had your Maine Roth IRA for at least 5 years. In special cases, such as the purchase of a first home or a physical disability, you may qualify for an early distribution without paying the standard 10 percent tax penalty.

During your working life in Maine, you may have the opportunity to participate in a retirement plan through your ME employer. Some employers give their employees the option to open a Roth IRA as a benefit of employment. You may contribute to a Roth IRA plan and a 401k through your company, provided your income does not exceed the Internal Revenue Service's maximum threshold. You may also open a Roth IRA independently and make contributions from your post-tax income for the rest of your life, as there is no mandatory age for collecting distributions.

Roth Conversions

Located on the Atlantic Ocean in the northernmost segment of New England, Maine has a long history in the shipbuilding industry. Fishing, agriculture, paper manufacturing and the lumber industry also contribute to the economy of ME, a state that offers abundant woods, rivers and lakes. Residents of Maine can build a stable future by adding a Maine Roth IRA to their investment strategy. If you currently have a traditional IRA and you want to convert it to a Roth account, the process is fairly simple.

You may convert the distribution from a traditional account to a Roth without paying the 10 percent tax penalty for an early distribution, provided you roll over the funds within 60 days after receiving the distribution. After 60 days, you may be responsible for the 10 percent tax penalty and may be charged income tax on the distribution if you have not completed the rollover. If you choose to keep a portion of the funds from your traditional to Maine Roth IRA rollover, you may be charged a penalty and income tax on the amount you keep. [1]

If you have a traditional IRA and you are already collecting distributions, you may not roll over funds that have been designated as required distributions. For instance, if you are 70 1/2, the mandatory age for beginning withdrawals from a traditional account, you may not roll over the money that is destined for your distributions during that calendar year. [1] However, you may roll over the funds that are left over after the mandatory withdrawals have been deducted.

Maine Roth IRA conversions allow ME investors with a high income to participate in this tax advantaged investment strategy. Under ordinary circumstances, you cannot contribute to a Maine Roth IRA if your income exceeds the limits established by the IRS. However, if you are converting a traditional to a Maine Roth IRA, the same income restriction does not apply.

Medical Care and Disability

Unplanned medical bills can have a devastating effect on a household's finances. A car accident, a work related injury, a diagnosis with cancer or another severe illness may result in hundreds of thousands of dollars worth of medical treatment, and some of these expenses may not be covered by your Maine health insurance policy. Uninsured Maine residents are especially vulnerable to the effects of a medical crisis. Overwhelming medical bills are one of the most common causes for bankruptcy in the country.

If your unreimbursed medical expenses, or the costs that are not covered by your insurance company or another source of compensation, exceed 7.5 percent of your adjusted gross income, you may qualify for an early distribution from your account without paying the 10 percent tax penalty. This benefit may prove extremely valuable if you need money to pay a surgeon, hospital or clinic for medical treatment that is not covered by insurance.

Disabled individuals may also qualify for an early distribution. No matter how conscientiously you prepare for an accident or work related injury, and no matter how secure your insurance coverage may be, the costs of rehabilitation, lost wages, additional medical care and living expenses can soon become overwhelming. Maine residents who are disabled can make withdrawals from their account without penalties before the age of 59 1/2.

Many investors are not aware of all the advantages that a Maine Roth IRA can provide. If you are buying or building a first home, for example, you can withdraw a certain amount of money without penalties for this important purchase. Request information from several investment advisors in the Pine Tree State to decide whether this investment strategy fits your goals.

http://www.irs.gov/publications/p590/ch01.html#en_US_2011_publink1000230896 01/10/2012

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