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Opening a Roth IRA

Updated on May 22, 2009

Opening a Roth IRA – Are You Qualified?

Though the government is in its continuous effort to provide good retirement benefits to each and every individual, the congress set specific guidelines on who can acquire a Roth IRA based on a person’s income. As a taxpayer, opening a Roth IRA requires you to contribute the maximum amount depending on your filing status, if your Adjusted Gross Income (AGI) is below a specific level. At a particular Adjusted Gross Income (AGI), allowed contributions will begin phasing-out until they are all proscribed for contributors, who have high compensation.

Roth IRA Requirements

If you are planning to get a Roth IRA, to be qualified, you should gain knowledge of the 2009 Roth IRA AGI phase out levels or limits on compensation. If you are a single filer, you must earn up to $105,000, so you can be qualified for full contribution, while you should gain profits of up to $105,000 to $120,000 to make you eligible for partial contribution. Joint filers on the other hand, should reflect earnings up to $166,000 to meet the criteria for full contribution and for partial contribution should have compensation up to $166,000 to $176,000.

For married couples filing separately or for couples who stayed and lived together in any month or months of a year, they need to have earnings up to $0.00 to be allowed for full contribution and up to $0.00 to $10,000 to be qualified for partial contribution. People who live together and are legally married are also allowed to make contributions, though they can only put small amount in their separate Roth IRAs.

Opening a Roth IRA obliges you to meet all the specific requirements such as meeting the minimum earned income rulings. It will only be possible for you to make contributions, if you have a taxable compensation, which excludes not taxable profits from investments.

Since the Roth IRA is considered as the most effective retirement plan, many people especially those who have Traditional IRAs convert their accounts as a Roth IRA. If you are one of those people who wish to convert their Traditional to Roth IRA, you should initially recognize the conversion limit set by the law. You can only convert your IRA to a Roth account if your MAGI is less than $100,000 during the conversion year and your filing status is not married filing separately. This restriction will be eliminated by 2010, since TIPRA 2005 eradicates the filing status ruling and MAGI limit. See Roth IRA rates for more information.

Opening a Roth IRA

Opening a Roth IRA, will entail researching about where you will put your funds. You can house your money in online banks, brick-and-mortar banks, brokerage firms and mutual fund companies. The next thing that you must do is to study all of the investment options to include mutual funds, bonds, certificates of deposit, stocks and other non-conventional assets. You can then assess and compare banks through the internet and learn about their interest rates, minimum deposit requirements and fees to determine what company best suits your option.

After choosing the best Roth IRA and where you will transact your money with, you must then provide your employment information, personal data and eventually pick your investment approach and appropriately assign your beneficiary. When making deposits, you can perform it either online or through mail. The minimum requirements for deposit of Roth IRA generally vary from $100.00 to $3,000, which highly depend on the mutual bank, brokerage firm or the bank. To steer clear of penalties and other surcharges, you should always verify the annual contribution limits for tax purposes.

How to Open a Roth IRA


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