Roth IRAs

With a few important exceptions, a Roth IRA is essentially a nondeductible traditional IRA . Roth IRAs are also generally subject to the same rules as traditional IRAs. For example, the contribution limits for Roth IRAs and traditional IRAs (deductible and nondeductible) are the same, but the Roth allows for a"catch-up" contributions by those age 50 and above.

Despite the similarities to traditional IRAs, Roth IRAs do have a number of unique attributes and requirements that you should be aware of. The most important ones are:

• Qualified distributions from a Roth IRA are tax-free.
• Contributions can be made to your Roth IRA regardless of your age.
• There are no required minimum distributions that must be made from a Roth IRA.
• Eligibility to contribute to a Roth IRA is subject to special limits.

Qualified distributions. To count as a qualified distribution, a Roth IRA distribution cannot be made before the end of the five-tax-year period beginning with the first tax year for which the individual (or the individual's spouse) made a contribution to the Roth IRA. In addition to the five-year holding period, a qualified distribution can only be made if it is:

• on or after the date the individual reaches age 59½
• to a beneficiary or an individual's estate on or after the individual's death
• attributable to the individual who is disabled
• used to pay for qualified first-time home buyer expenses

Distributions that do not meet the above requirements are considered nonqualified distributions. The Roth IRA holder will owe income taxes on any earnings withdrawn.

Contact your Johnson Bank personal banker for more information.