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Roth IRA Restrictions

Updated on July 1, 2009

What Are the Roth IRA Restrictions?

The best way to handle your Individual Retirement Account (IRA) is to learn about the rules and regulations that surround your retirement plan. If you are an account holder of a Roth retirement account, you must be familiar with the Roth IRA restrictions that include income and contribution limits. These two natures of restrictions profoundly affect your eligibility to make contributions to your Roth IRA. 

A Roth IRA is recognized as a powerful and efficient approach to save and prepare for your retirement years. This retirement plan grants you the advantage of setting aside after-tax funds and as a result grants you a resource of tax free gains and profits, which you can get hold of after you reach the qualifying age of 59 ½. Another good thing about a Roth retirement account is that you are eligible to carry out contributions, provided that you have source of income or any form of compensation. There will also be no forced minimum required withdrawals when you reach the age of 70 ½. 

Roth IRA Qualifications

In real fact, investing in a Roth IRA is a pretty straightforward procedure. If you earn very large income, it is more likely that you will not be qualified to open and contribute to a Roth IRA. There is even a threshold on income, where you are only allowed to make reduced or partial contributions, recognized as the phase-out limits.

It’s important to note that the income involved in making contributions to a Roth IRA is not your gross income rather it is your AGI or adjusted gross income. The calculation of your AGI is done after you’ve completed your federal income taxes reflected in your Form 1040, which is submitted to the Internal Revenue Service. If you have no idea on how you can get your accurate adjusted gross income, you can take a look on your previous year’s tax form and search for the AGI reference, normally positioned in line 36.

Roth IRA Restrictions & Fees

The Roth IRA restrictions on income for 2009 are: for those who have filing status of single/head of household, they can make full contributions if their income is not more than $105,000 and they can carry out reduced or partial contributions if their salary is between $105,000 to $120,000. For those who have filing status of married filing jointly, they are qualified to accomplish full contributions if their compensation does not exceed $166,000 and they can execute partial or reduced contribution if their wage is within the range of $166,001 up to $176,000.

Another limit that you need to appropriately address is the restrictions on contributions in every tax year. Those who are at the age of 50 or older are given the opportunity to make additional contributions, known as the catch-up contributions. For 2009 the annual contribution limit is $5,000 while the limit on Roth IRA catch-up contributions amounts to $1,000.

Additional Roth IRA Information

Setting up your own Roth IRA is easy; you just have to transact it with your bank, an investment broker or an insurance company, wherein the foremost investments can be as little as $250. Keep in mind that the Roth IRA restrictions may vary from year to year, that’s why you need to promptly acknowledge any changes in the Roth retirement accounts rules on limits including other regulations in managing your IRA.

For more information about Roth IRAs, you can read through the following topics:


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