What is a Roth IRA?
A Roth IRA is one of the most exciting personal savings options available today. While contributions to your Roth IRA are not tax deductible, the best part about owning a Roth IRA is what happens when you withdraw from the account. If certain conditions are met, withdrawals from your Roth IRA are tax-free and penalty-free.
Who can contribute to a Roth IRA?
You may contribute to a Roth IRA as long as you have income from working and do not exceed the income limits set for that year. There is no maximum age limit for contributing. If married, you and your spouse may each set up your own Roth IRA. If one spouse has little or no compensation, the spousal rules may allow each of you to contribute to your Roth IRA’s.
A maximum income limit applies to Roth IRA contribution eligibility.
When can I make contributions?
Contributions for a year may be made up to the tax-filing deadline (usually April 15) for that year, no including extensions. Remember, there is no maximum age limit; if you are working, contributions can be made for the year, even if you are age 70 ½ or older.
How much can I contribute?
Contributions are limited to a specific dollar amount each tax year, based on your age. For 2017 and 2018, the contribution limit is $5,500 if you are under age 50, and $6,500 if you are age 50 or older. Contributions may not exceed 100% of compensation, e.g., wages, salaries, tips, professional fees, bonuses, etc. If you or your spouse has little or no compensation, the spousal rules may allow each of you to contribute the full amount of your Roth IRA’s.
When can I withdraw funds from my Roth IRA?
You can take money out of your Roth IRA at any time. Unlike a Traditional IRA, you are never required to withdraw from your Roth IRA, even when you reach age 70 ½. Your account can continue to grow until you need the funds, and any funds you don’t need can be passed onto your heirs.
IMPORTANT! – Tax rules can be complicated. This information is intended to serve as a general overview. Before making any decisions, you should speak with a qualified tax advisor.