Roth IRA

The decision to open a Roth IRA should be based on a number of factors, such as your age, current income tax rate, expected income tax rate in retirement, how many years you will invest and the expected rate of return. To help you analyze these often-complicated factors, it makes sense to seek the help of an investment professional.

Key benefits of a Roth IRA:

• Contributions Grow Tax-Deferred
  Contributions to a Roth IRA are not tax deductible, but they can be withdrawn tax free (this contrasts to a Traditional IRA, in which contributions may be tax deductible and taxes are owed on withdrawals).
  
  
• Withdrawals Not Mandatory During Your Lifetime
  Unlike a Traditional IRA, you are not required to start making withdrawals after age 70 1/2. If you don't need the money, the account continues to grow tax-free.
  
  In addition, you can continue to put money into a Roth IRA after you reach 70 1/2 as long as the money comes from earned income, not investment income. Because you are not required to make withdrawals during your lifetime, a Roth IRA becomes an estate planning tool because you can pass your account intact to heirs.

Other important features of a Roth IRA:

• Contribution Levels
  The maximum annual contribution to a Roth IRA is $4,000 for individuals and $8,000 for married couples for 2007 and $5,000 for individuals, $10,000 for married couples in 2008. These limits are higher for individuals age 50 and older.
  
  
• Rollovers
  Rollovers can be made from a Traditional IRA into a Roth IRA, provided your Modified Adjusted Gross Income (MAGI) is less than $100,000. However, you will need to pay income tax on the converted assets.
  
  The money for the tax should come from assets outside of your IRA. Otherwise, if you use funds from your IRA to cover the taxes, you'll owe a 10 percent penalty for early withdrawal if you're under age 59 1/2 since 100 percent of the previous IRA was not placed into the new Roth IRA. This may set back your retirement savings too much to make a Roth IRA Rollover worthwhile.
  
  
• Tax-Free Earnings
  Earnings can be taken out tax-free and penalty-free if a Roth IRA has been held for at least five years and you meet one of the following: You are over the age of 59 1/2, the funds (up to $10,000) are used for the purchase of a first home or the withdrawal is due to death or disability.

Although each situation is unique, in general, a Roth IRA may meet your needs if:

• You are a single individual with an MAGI of less than $99,000 in 2007 ($101,000 for 2008) or a married couple filing jointly with an MAGI of less than $156,000 in 2007 ($159,000 for 2008). (For a rollover from a Traditional IRA, MAGI for singles and married couples must be less than $100,000.)
• You expect your income tax rate to increase or stay high at retirement.
• You have the cash outside your IRA to pay the tax if you roll over a Traditional IRA into a Roth IRA.
• You are close to retiring or are already retired and anticipate that you will not need all of the money in your Traditional IRA.
• You want to use your Roth IRA as an estate planning tool.
• You are under age 59 1/2 and want to use a tax-sheltered investment for key expenses, such as a first house.
• You may need to access your account within five years. If so, the Roth IRA offers favorable tax treatment because you may withdraw contributions tax-free at any time.

Lincoln Investment Planning, Inc. Can Help

Today, you may no longer rely on just your company pension and Social Security to provide adequate funds for retirement. You should consider developing a retirement investment plan that makes maximum use of available tax benefits, so that your retirement assets will grow more quickly. If you meet the criteria, consider a Roth IRA. However, because the rules governing a Roth IRA are complex, you should work with a financial and tax professional.

Lincoln Investment Planning, Inc. has specialized since 1968 in providing retirement planning services. A Lincoln Investment financial representative looks forward to working with you to explore the opportunities offered by a Roth IRA.