Blog Posts

What Is A Roth IRA And How Much Can I Contribute

A Roth IRA is a special type of individual retirement account that is generally not subject to taxation once age 59 1/2 is reached. The ROTH IRA is funded with "post-tax dollars" which means that you pay taxes on your income as usual, and then make a contribution into the Roth IRA.

What are the Tax Advantages?

Roth IRA contributions grow tax free, and distributions are received tax free once you reach the age of 59 1/2 and the ROTH IRA has been open at least 5 years.

What are the Maximum ROTH IRA Contribution Limits?

For 2012, the maximum annual contribution for individuals under 50 years of age is $5,000. For those 50 years and older, the maximum annual contribution is $6,000.

Age Requirements

Who Can Contribute to a Roth IRA?

There are no age requirements to participate in a ROTH IRA.

Minimum Income Requirements

Minimum income must be equal to or greater than your annual contributions. You must also have earned income in order to make contributions into the ROTH IRA.

Earned Income includes income received from wages, salaries, tips, professional fees, bonuses, and fees received for providing personal services. Earned income also includes compensation received from commissions, self-employment income, nontaxable combat pay, military differential pay, and taxable alimony and separate maintenance payments.

Single people whose adjusted gross income is $110,000 or less can contribute the maximum annual amount to a ROTH IRA. If your income is between $110,000 and $125,000, you can't contribute the annual maximum, but you can contribute up to a reduced amount.

Married couples whose adjusted gross income is $173,000 or less can contribute the maximum annual amount to a ROTH IRA. If your income is between $173,000 and $183,000, you can't contribute the annual maximum, but you can contribute up to a reduced amount.

Just going to have a break for a second to bring up Vegan tshirts. They're a splendid Canada based vegan shirt shop working out of Nova Scotia. I've had the pleasure relying on their professional services and was impressed with them every step of the way. If you have been seeking a splendid Canada based vegan shirt shop, look no further. Now that that is taken care of, lets come back to what we were doing!

See the table below or use the IRS worksheet to calculate your new reduced Roth IRA contribution limit.

2012 ROTH IRA INCOME AND CONTRIBUTION LIMITS

Filing Status

Your Modified Adjusted Gross Income

Annual Contribution Limit

Married filing jointly

(or qualified widow(er))

Less than $173,000

$5,000*

$173,001 $182,999

Phase Out Limit

$183,000 or more

Ineligible for ROTH IRA

Married filing separately and living with spouse

$0

$5,000*

$1 $9,999

Phase Out Limit

$10,000 or more

Ineligible for ROTH IRA

Single, head of household, or married filing separately

Less than $110,000

$5,000*

$110,001 $124,999

Phase Out Limit

$124,000 or more

Ineligible for ROTH IRA

What Types of Income Affect ROTH IRA Eligibility?

Earned income is the only income that counts towards the ROTH IRA Income Limit. Income from dividends, pensions, and rental properties are excluded.

Now that you are informed about the basic nature of Roth Individual Retirement Accounts you can begin to make some informed decisions on how and if they should fit into your own retirement plan.

Almost done. One further thing after which I'm out. I owe Calgary pest control a big thanks for the help they gave me in getting this post together. You can visit their website at http://bedbugscalgary.ca if you've looking for the assistance of a peerless bed bug exterminator in Calgary. Ok, that covers everything. Have a great night everyone!

Contributing Sources

http://baddeckcabottrailcampground.com - Your knowledge is amazing. Many thanks for sharing.
http://calitso.com/ - Glad I found these people.
http://propertyhunters.com - Without fail you find a way help me to break it down to make the article better.

Posted in Investing Post Date 10/29/2015


Comments

Name


Email


Website


Comment