The Roth IRA Qualifications
Do you want to know whether you have the right Roth IRA qualifications to own one? This article will answer that question and provide some background information for you.
A Roth IRA is an IRA savings account that was proposed in the late 90s by Senator Roth, as a way for individuals to put after-tax money aside for their future. Whilst it was originally envisaged as a vehicle to save for medical, schooling or other large expenses, today most investors focus on retirement savings needs.
A Roth can be setup at major banks, brokerage firms or mutual fund families. They are quite flexible as to the investments you can keep in a Roth, which include common stocks, bonds, commodities and real estate investment trusts (REITs). If you choose to situate a Roth with a mutual fund family, you will have a long list of investment options available to you and for this reason many people find this the preferred choice.
The Roth IRA qualification are specific. You are allowed to invest $5000 per year and a couple can invest a combined $10,000. As a retirement incentive, those aged over 50 are allowed to invest $6000 per year. You have the option whether to split the investment between a traditional IRA and a Roth.
A Roth is designed for middle income earners, rather than top earners. Accordingly, a single person must earn less than $105,000 a year to qualify. If the person earns between $105,000 and $120,000, then a reduced contribution may be made. If a married couple wish to start a Roth and they file jointly with the IRS, then they can invest as long as they earn less than $166,000 combined income. There are again reduced contributions possible if they earn more than $166,000 but less than $176,000. If a single person or a couple filing jointly exceed the upper limits mentioned above, then they are not allowed to open and contribute to a Roth.
Please note that the contribution and income limits mentioned in this article do change with inflationary adjustments, but are not amended consistently every year, and so it will be necessary to confirm the current numbers before proceeding. This can be done through a good tax accountant or via a direct inquiry with the IRS.
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