There are two qualifications that must be met to fund a Roth IRA. The first qualification is that either you or your spouse must have earned income at least in the amount you wish to contribute to the individual retirement plan; and, second, you must meet certain income limitations.
Either you or your spouse must have earned (not investment) income at least in the amount that you contribute to the Roth IRA. For example, if you wish to contribute $5,000 to a Roth IRA for the year 2011, either you or your spouse must have earned at least $5,000 in 2011.
Even if you did not have earned income, you can contribute to a Roth in your own name so long as your spouse had earned income.
Roth Income Limitations
Full Roth IRA participation is available if you are single and have income less than $107,000 or married and have income less than $167,000.
A phase out of eligibility begins for single filers at $107,000 per year and ends at $122,000 (the maximum annual income allowable for single filers.) If you’re married, the phase out starts at $169,000 and ends at $179,000 (the maximum annual income allowable for married filers.)
This means that if you have income over $122,000 and you’re single or you have income of $179,000 and you’re married, you cannot contribute to a Roth IRA.
Maximum Roth IRA Contributions
You can contribute $5,000 to a Roth IRA each tax year; if you’re 50 years of age or older, you can contribute an additional $1,000 per, for a total of $6,000 per tax year.
Roth IRA Benefits
- Your contributions (and their growth) grow tax deferred.
- If you opened your Roth IRA more than five years from the date of any distribution, all distributions are tax free.
- Your Roth IRA assets can grow throughout your entire lifetime, without forced distributions. There are no required minimum distributions required during your lifetime.
- There is no maximum age limit for contributing to a Roth IRA.
- If you are disabled, you can withdraw Roth IRA assets without penalty.
If you’re wondering whether a Roth IRA is right for you, consult with a qualified estate planning attorney.
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