Here’s a quick recap on the ROTH IRA, it’s rules and benefits.
A Roth IRA is an Individual Retirement Account (IRA) allowed under tax law in the US in which you can withdraw earnings tax free any time after the age of 59 and a half; long as the account has been open at least five years.
Rules for a Roth IRA can be a little different form that of a regular IRA account. For example, with a Roth IRA:
- Contributions are not tax deductible
- There is no Mandatory Distribution Age
- All earnings and principal are 100% tax free if rules and regulations are followed
- It is available only to single-filers making up to $95,000 or married couples making a combined maximum of $150,000 annually.
- Principal contributions can be withdrawn any time without penalty (subject to some minimal conditions)
When it comes to contributing to a Roth IRA account certain rules can apply in certain situations. Situations that don’t affect contributions are as follows:
- No age limit – even a minor can set up a Roth IRA account and contribute to it
- No employer plan limit – even if you participate in an employer plan such as a 401k, you can still contribute to your Roth IRA account
- Conversion doesn’t affect regular contribution – you can make regular contributions even if you’ve made a conversion within the same year
As of 2010, limits for contributing to a Roth IRA depended upon age. For those age 49 and below, the limit for a regular contribution to a Roth IRA is $5,000 and for those age 50 and above, that number increases to $6,000.
Certain necessities are also required in contributing to a Roth IRA account. For example, if either you or your spouse (if you file jointly) want to contribute, you must have compensation or alimony income. Compensation income includes any income made from either your employer or through self employment. In terms of alimony, you can contribute to an IRA even if you receive alimony payments and don’t work for a living.
