What is a Roth IRA?
A Roth IRA contribution is not tax deductible, however, earnings accumulate tax free and unlike Traditional IRAs, you are not taxed on withdrawals. Since your contributions have already been taxed, your principal and interest can be withdrawn tax free.
Am I eligible for a Roth IRA?
Unlike a Traditional IRA, you can contribute to a Roth IRA even if you are over 70½ if:
- You have earned income equal to or greater than your contribution amount, AND
- You can make a full contribution if your modified adjusted gross income is less than $120,000 for single filers and less than $189,000 for married filing jointly and $0 for married filing separately.
- You can make a partial contribution if your modified adjusted gross income is less than $135,000 for single filers and less than $199,000 for married filing jointly and $0 for married filing separately.
Contribution Restrictions and Phase Out Limits:
*See IRS Publication 590 for more information on calculating Traditional IRA decisions
How much can I contribute?
Maximum contribution amounts vary by year as follows:
- $6,000.00 ($7,000 if you are age 50 or older)
- $5,500.00 ($6,500 if you are age 50 or older)
If the amount you can contribute must be reduced due to your modified adjusted gross income go to IRS.gov and see Publication 590-A, Contributions to Individual Retirement Accounts (IRAs), for a worksheet to figure your reduced contribution.
What is a catch-up contribution?
For tax years 2008-2009 and after, individuals who attain the age of 50 before the end of the tax year may be eligible to make a "catch-up" contribution in addition to their normal contribution.
IRA Catch Up Contributions
Are my Roth IRA earnings taxable?
They are penalty-free and tax-free if withdrawn after the required five-year period and one of these exceptions applies:
- You are over age 59 ½
- Death or disability
- Qualified medical expenses
- Qualified education expenses
- First time home purchase
- Due to IRS levy
When can I withdraw my Roth IRA assets?
You can withdraw your contributions at any time, penalty-free and tax-free, unless you have converted Traditional IRA funds in your Roth IRA. Converted funds are also withdrawn penalty-free, provided these funds are withdrawn after the required five-year period or if an exception applies, see above list.
Am I ever required to withdraw my Roth IRA funds?
Unlike a Traditional IRA you are not required to take minimum distributions at age 70½. You can leave funds in your Roth IRA until you need them.
Can I move my Roth IRA or combine Retirement Savings?
You can move your Roth IRA from one financial institution to another.
Can I convert my Traditional IRA to a Roth IRA?
Yes. There are specific rules for converting a Traditional IRA to a Roth IRA. Some of these include:
- If you are married, you must file a joint tax return
- You must pay taxes on the pre-tax dollars that you move
- The conversion must be completed within 60 days