Roth IRA

Qualified Reservist Distribution

An opportunity made available for members of the U.S. Armed Forces to take a distribution from their IRA without penalty and repay at a later date.

(True or False) Qualified distributions are tax-free.

True

Portability

the movement of retirement assets between retirement accounts.

Death Distribution

A distribution to a beneficiary after the death of the IRA owner. Death Transfer and Distribution Guide

Substantially Equal Periodic Payments

A series of distributions from the IRA that are made in equal installment payments, over the life expectancy of the retirement account owner.

Qualified Distribution

An amount withdrawn after the 5 year aging period has been satisfied AND the distribution is made for one of the following reasons:•On or after the date the owner has reached age 59 ½ •Due to death of the owner •Due to disability •For qualified first time home buyer expenses

Nonqualified Distribution

An amount withdrawn before the 5 year holding period has been satisfied or without satisfying one of the qualification criteria.

Nonqualified distributions are subject to ordinary income tax on the earnings. Additionally, the taxable portion of distributions taken prior to the IRA owner reaching 59 ½ are subject to an additional 10% penalty (also known as a premature penalty) unless one of the following exceptions applies:

Death, Disability, Series of Substantially Equal Periodic Payments, Medical Insurance Premiums While Unemployed, First Home Purchase, Higher Education Expenses, IRS Levy, Qualified Reservist Distribution, Birth or Adoption of a Child

Removal of Excess Contributions

Distribution of contributions in excess of the annual limits. Annual Contribution Limits

Invesco Policy (IRA owners)

Invesco requires that IRA owners be at least the age of majority in their state of residence to establish an account. Ref:Age of Majority and Guardianship for Retirement Accounts for state guidelines and exceptions to this policy.

Roth Registration Codes:

RC: 253, 278, 281, 791, 792, 796

First Time Homebuyer

The account holder may use up to $10,000 to buy, build or rebuild a first home for their self, spouse, child, grandchild, parent or other ancestor.

(True of False) •Roth IRA contributions are not deductible.

True

Five Year Recapture Rule

Under a different rule, each conversion contribution is tracked separately for determining if a 10% recapture tax (premature penalty) applies to amounts distributed from that specific conversion. This "five year recapture period" should not be confused with the five year aging period. Each conversion may use the Roth IRA's original five year aging period for determining whether the distribution is qualified. This "five year recapture period" determines whether or not the 10% penalty is applied to amounts distributed from that conversion.

Roth IRA

a personal savings plan where regular nondeductible contributions accrue tax-free earnings.

Health Savings Account (HSA) Distribution

distribution from a traditional or Roth IRA to fund the current year's Health Savings Account regular contribution.

IF you have taxable compensation and their filing status is Married filing jointly or qualifying widow(er) AND your modified AGI in 2020 is...At least $196,000 but less than $206,000 AND your modified AGI in 2019 was... At least $193,000 but less than $203,000 THEN...

the amount you can contribute is reduced*

Types of Permitted Contributions:

•Regular current year and prior year contributions within the annual limit. •Conversion contributions from Traditional, SEP, SARSEP, and SIMPLE IRAs (no AGI limits) •Direct Rollover conversion from Qualified plan or 403(b) plan pretax contributions •Indirect rollover contribution from another Roth IRA within 60 days •Trustee-to-trustee Transfer of Assets •Designated Roth 401(k) or Roth 403(b) rollover to Roth IRA •Recharacterizations of regular contributions from a Traditional IRA with earnings •Rollover of airline carrier bankruptcy payments •Rollover of the military death gratuity and SGLI payments

Requirements for Establishing an Invesco Roth IRA:

◦Complete an Invesco Traditional or Roth IRA Account Application found in the Invesco Individual Retirement Plans Kit.◦Forward the application with a purchase amount meeting our purchase minimums or a Retirement Account Transfer/Rollover Form.

Roth IRA

Contribution amounts may be withdrawn tax and penalty free at any time and earnings may not be subject to federal income tax as long as certain requirements are met.

Five Year Aging Rule

The five year aging period begins JANUARY 1 OF THE YEAR FOR WHICH THE FIRST CONTRIBUTION OR CONVERSION CONTRIBUTION IS MADE: Example 1: First contribution is made April 1, as a prior year contribution; the beginning date for the 5 year period will be January 1 of the prior year. Example 2: First contribution is made December 31 as a current year contribution; the beginning date for the 5 year period will be January 1 of the current year.

IF you have taxable compensation and their filing status is Married filing jointly or qualifying widow(er) AND your modified AGI in 2020 is...Less than $196,000 AND your modified AGI in 2019 was... Less than $193,000 THEN...

they may contribute up to the contribution limit including age 50 catch up, if eligible.

IF you have taxable compensation and their filing status is Married filing separately and you lived with your spouse at any time during the year AND your modified AGI in 2020 is...Zero ($0) AND your modified AGI in 2019 was... Zero ($0) THEN...

they may contribute up to the contribution limit including age 50 catch up, if eligible.

IF you have taxable compensation and their filing status is Single, head of household, or married filing separately and did not live with your spouse at any time during the year AND your modified AGI in 2020 is...Less than $124,000 AND your modified AGI in 2019 was... Less than $124,000 THEN...

they may contribute up to the contribution limit including age 50 catch up, if eligible.

•IRA contribution limits are the lesser of 100% of compensation or the following dollar amounts. However, contributions may be reduced depending on modified AGI as outlined in the next section.Age 50 & Older Contribution Limits

2013 -2018 ($5,500 $1,000 $6,500), 2019-2020 ($6,000 $1,000 $7,000)

Roth IRA

•Initially offered in 1998 as a result of the Taxpayer Relief Act of 1997, this retirement plan was developed to reduce the tax liability of asset distribution.

In order to contribute to a Roth IRA, the owner must meet two requirements:

(1)The depositor (or their spouse if filing a joint tax return) received taxable compensation during the year. (2) •The depositor must meet certain modified AGI requirement as detailed under contribution limits.

IF you have taxable compensation and their filing status is Married filing jointly or qualifying widow(er) AND your modified AGI in 2020 is...$206,000 or more AND your modified AGI in 2019 was... $203,000 or more THEN...

no contribution can be made to a Roth IRA.

IF you have taxable compensation and their filing status is Married filing separately and you lived with your spouse at any time during the year AND your modified AGI in 2020 is...$10,000 or more AND your modified AGI in 2019 was... $10,000 or more THEN...

no contribution can be made to a Roth IRA.

IF you have taxable compensation and their filing status is Single, head of household, or married filing separately and did not live with your spouse at any time during the year AND your modified AGI in 2020 is... $139,000 or more AND your modified AGI in 2019 was... $137,000 or more THEN...

no contribution can be made to a Roth IRA.

IF you have taxable compensation and their filing status is Married filing separately and you lived with your spouse at any time during the year AND your modified AGI in 2020 is...More than zero ($0) but less than $10,000 AND your modified AGI in 2019 was... More than zero ($0) but less than $10,000 THEN...

the amount you can contribute is reduced*

IF you have taxable compensation and their filing status is Single, head of household, or married filing separately and did not live with your spouse at any time during the year AND your modified AGI in 2020 is...At least $124,000 but less than $139,000 AND your modified AGI in 2019 was... At least $122,000 but less than $137,000 THEN...

the amount you can contribute is reduced*

AGI Limits for Roth IRA Contributions: The amount eligible to be contributed depends upon

the marital status, filing status and modified AGI.•There are no AGI limits for conversion contributions.

Recharacterization

the movement of a current year or prior year contribution, plus earnings to a Traditional IRA or vice versa.

Rollover

the movement of assets from a Designated Roth account to a Roth IRA or Roth IRA to Roth IRA, directly or indirectly.

Transfer of assets

the movement of assets from one custodian to a like plan at a different custodian (e.g. Roth IRA to Roth IRA).

Conversion

the rollover of funds from a traditional, SEP, SARSEP or SIMPLE IRA to a Roth IRA if certain requirements are met, where the taxable amount of the rollover funds will be included in the gross income for the year in which the conversion is made.

The deadline for establishing and contributing to an IRA is

the taxpayer's tax filing deadline, not including extensions. Generally, the due date is April 15th of the following year unless the date falls on a weekend or legal holiday.

Roth IRA Benefits:

•Earnings in the account may never be subject to federal income tax. Investment earnings can be withdrawn without paying a penalty or federal income tax IF: ◦The Roth IRA has been open for five years. Refer to Five Year Aging Period. AND ◦Withdrawn for a qualified distribution reason. Ref: Distributions section and the Roth Distribution Matrix *2/28/2020 •Return of contributions (return of basis) is generally tax free and penalty free, regardless of age or holding period. Since contributions into a Roth IRA are nondeductible, the dollar amount of the contributions (basis) may be withdrawn at any time without taxes or penalties. Withdrawal of conversion amounts, however, may be subject to a 10% recapture tax, if withdrawn before the five year recapture period is over. See Ordering Rules and Five Year Aging Rule for more information.•Depositor may contribute as long as he/she has earned income within the AGI limits. •Roth IRAs are not subject to required minimum distributions (RMD) but distributions are required to be made to the beneficiary upon the Roth IRA owner's death.

Ordering Rules for Distributions - In order to pay the smallest tax amount possible, the shareholder reports distribution amounts as being redeemed in the following order (these rules apply to Roth distributions in the aggregate):

•Regular Roth IRA contributions (including rollovers from designated Roth contributions) •Conversion amounts (by year, beginning with amounts from the first year of conversions, then subsequent years, taxable amounts of each conversion first, then nontaxable amounts) •Earnings

Roth IRA assets can be moved by:

•Transfer of assets •Rollover •Recharacterization •Conversion