Roth IRAs are an important investment vehicle for people seeking a place to invest their money and withdraw the funds tax free. Withdrawals from these accounts are not taxed, as the contributions deposited into the account are taxed. Since there are a number of rules and regulations pertaining to Roth IRAs, it is important that you are aware of them before investing.
The rules pertaining to a Roth IRA require that the account owner be employed before making contributions. Taxable compensation is the term used to describe the type of income that is eligible to make Roth IRA contributions. Taxable compensation includes such typical income types as wages and commissions, but also include other income types such as self-employment income and combat pay. However, the rules also state that you can make contributions to your Roth IRA if your spouse is employed and you file your taxes jointly.
A major benefit of the Roth IRA is the ability to make contributions at any age. Regular IRAs require that you cease making contributions at age 70 1/2. Roth IRAs, however, allow you to continue making contributions to your account past this age, with the stipulation that the you or your spouse has taxable income.
Roth IRAs have a maximum contribution limit that is placed on investors. People under the age of 50, as of the time of publication, can contribute up to $5,000 per year, while people over the age of 50 can contribute up to $6,000 per year.
If you have a high income, you may not be eligible to contribute to a Roth IRA. The maximum income limit for individuals, as of the time of publication, is $122,000 per year. The maximum income limit for couples, as of the time of publication, is $179,000 per year. Minimum income limits are set only at the amount of contributions made to the account per year. You are not permitted to contribute more to your account than you earned in taxable income for the year.
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