Pin It

Roth IRA qualifications and advice

Shawn | Aug 23, 2010 |

0 Comments | Rating: 0

The Roth IRA is a retirement fund that was created to allow middle-class Americans to contribute to their retirement funds easier. Many retirement funds have tax with holdings, have a large amount of upfront or annual money needed, and are just plain difficult for many in lower income brackets to fund. Since the Roth IRA is specifically for those that fall in the middle class income bracket, there are income and contribution limits and also an age requirement as well. Income and contribution limits are based on an individual or married couples Adjusted Gross Income (AGI). There are also benefits of the Roth IRA easy withdrawal components that make it a positive investment experience for many.

The Roth IRA qualifications are as follows a single individual cannot make more than 110,000 and still contribute to a Roth IRA couples that are married and filing jointly cannot earn more than 160,000 and contribute to the Roth. If a couple is married and files separately both spouses are allowed to contribute 5000, as long as both spouses made at least 5000 that year.

Roth also has limits about how much you need to make in order to contribute. You must make as much income as you contribute to the Roth. For example, if you contributed 2,000 to your Roth fund in 2009, you must have also made at least 2,000 AGI to have contributed this amount. The most money anyone is allowed to contribute annually to a Roth IRA is 5000, if under of the age of 50. Over the age of 50 years old, a person is allowed to contribute 6000 until the age of 59 12 when contribution must end.

An individual cannot contribute to the Roth after 59 12, and you are required to make withdrawals starting at age 70 12. There is a minimum amount of money you must take out every year after this age, and it is dependent on your current income and how much money is in your Roth IRA. Withdrawals of earnings are tax-free if you are over age 59 and have had your Roth IRA qualifications for at least five years. Otherwise, they are taxable and may subject to the early withdrawal penalty. Additionally, you cannot withdraw any funds from the Roth, and leave it as an inheritance to family upon death. Another plus of the Roth IRA is that you are allowed to contribute until tax day the year after your earned income. For example if would like to contribute to 2010 IRA, you have until April 15, 2011 to do so.

While the Roth IRA is not the best investment plan for everyone, it does offer individuals who may not otherwise fund any retirement plan the opportunity to invest into their future. Speaking to a financial planner, personal banker, or HR person is best way to get personalized Roth IRA advice.