All About Roth IRAs
With several options for your retirement savings, it can seem overwhelming to decide which choice is the best one for you. One popular type of retirement plan is the Roth IRA and opening an account is not difficult at all, provided you qualify under the terms of its requirement. Of course, choosing the right mutual fund holdings to achieve the best Roth IRA rates of return is another matter, but that’s beyond the scope of this article.
Here is what it takes to start a Roth IRA account:
Income Source
You can be any age to open a Roth IRA account provided that you earn an income from some type of work. This money can be derived from salaries, wages, tips, bonuses, and professional fees.
Income Limits
Your income level may also not exceed a certain amount depending on your filing status. Those over the income limits will not be able to open a Roth IRA account. Those who go over income limits during the tax year, must stop their contributions until income goes down or eligibility amounts for the Roth IRA increases. The current rates in 2010 for contribution eligibility are as follows:
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$105,000 – for those filing Single, Head of Household, or Married Filing Separately (not having lived with spouse during the year.)
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$167,000 – for those filing Jointly..
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$10,000 – for those filing Married Filing Seperately (and have lived with spouse during the year).
Contribution Limits
You may contribute to your Roth IRA account from the start of January until the following year’s tax deadline (April 15). You may only contribute up to $5,000 unless you are over the age of 50. After age 50, you can contribute an extra $1,000. Contribution limits do change from year to year coinciding with inflation. Spouses may also contribute to a Roth IRA account even without compensation income, provided the couple files jointly on income taxes.
Other Contributions
You can contribute to other retirement savings plans like a 401k or 403b and still contribute to a Roth IRA account. If you have converted another account into a Roth IRA, you are still capable of contributing during the year of the conversion.
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