Terms of Use

What is a Roth IRA?

The purpose of a Roth IRA is to put away money for retirement.  To be classified a Roth IRA, the account or annuity must be designated as a Roth IRA when it is set up. An IRA can be a Roth IRA, but neither a SEP IRA nor a SIMPLE IRA can be designated as a Roth IRA.

Roth IRAs are funded with after-tax dollars; the contributions are not tax deductible but qualified distributions are tax-free.  You may be able to take a Saver's Tax Credit of 10% to 50% of the contribution if you qualify so check with your tax professional.

Who can contribute?

Generally, you can contribute to a Roth IRA if you have taxable compensation (this can be in the form of wages, salaries, tips, professional fees, bonuses, etc.).  

To be eligible to make a contribution to a Roth IRA (or a deductible contribution to a Traditional IRA), your modified adjusted gross income (MAGI) must be less than a stated amount, depending on tax-filing status.  

Contributions to your IRAs can be made beyond age 70-1/2. 

Are contributions tax-deductible?

Unlike the Traditional IRA, contributions to the Roth IRA are not tax-deductible. However, any income generated grows tax-free in a Roth IRA.

When can I make withdrawals?

After funds have been in a Roth IRA for five years, you can make tax-free withdrawals after age 59-1/2.  Early withdrawals, or distributions, from a Roth IRA are normally subject to a 10% additional tax penalty. 

Funds may be withdrawn without penalty for certain circumstances such as the purchase of a first home, pay for higher education, or for disabilities.

With a Traditional IRA, you must make mandatory withdrawals after reaching age 72.  With a Roth IRA, you don't have to make mandatory withdrawals.

If you satisfy the requirements, qualified distributions are tax-free. You can leave amounts in your Roth IRA as long as you live.

What are the Roth IRA contribution limits?

In 2021:

  • Age 49 and under:  100% of compensation, up to $6,000. 

  • Age 50 and older can contribute an additional $1,000.

What are the income limits for contributions to a Roth IRA?

In 2021:

  • Single:  $125,000 - $140,000
  • Married, filing jointly:  $198,000 - $208,000
  • Married, filing separately:  $0 - $10,000

If your adjusted gross income exceeds these limits, then you are no longer eligible to contribute to a Roth IRA.  

Is there an age limit?

There is no age limitation for Roth IRA contributions. Unlike Traditional IRAs, you can be any age and still qualify to contribute to a Roth IRA.

Contributions to spousal Roth IRA:

With a Roth IRA your spouse can also qualify for a contribution (even if your spouse has little or no compensation) as long as you file a joint tax return.

When to make contributions?

Contributions to a Roth IRA can be made at any time during the year or by the due date of your return for that year (not including extensions).  If you want to make a Roth IRA contribution for this year, you could make it anytime between January 1 and April 15 of the next year.

For complete information and definitions of terms, get Publication 590 “Individual Retirement Arrangements” at https://www.irs.gov/uac/About-Publication-590A