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Tuesday, December 15, 2020

Roth IRA

The contribution limit is currently $6,000 per year, or the amount of your earned income f

The absolute maximum contribution limit for a Roth IRA is $5,500. Remember that these numbers change each year, so be sure to verify you have the right numbers before relying on them. These numbers are for the year 2018.

Eligibility

If you are single, and your modified adjusted gross income (MAGI) is below $120,000, you can contribute up to the maximum each year. If your income is above $135,000, you cannot contribute to a Roth IRA at all.  If your income is between those two numbers, you can make a partial contribution (less than the maximum, calculated according to your exact income).

If married, with a combined income below $189,000, you can contribute up to the maximum each year. If your combined income is above $199,000, you cannot contribute at all. Between those two numbers allows a partial contribution.

Benefits

Roth IRAs contain post-tax dollars (you make deposits using money you have already paid taxes on).

Roth IRAs grow tax-free.

Roth IRA contributions can be withdrawn at any time, penalty-free and tax-free. There is no age requirement. However, Roth IRA earnings and rollovers cannot be withdrawn before age 59.5, or they are subject to a 10% penalty (still no taxes though).


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