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History Of The Roth Ira
 History of Roth Individual Retirement Account (IRA) forms an integral part of history of IRAs because the Roth accounts not only brought back people’s interest in IRA accounts, but also enabled them to save enough money for their retirement outside of the plans sponsored by their employers. More..
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Guidelines For Roth Ira
The income level restriction or the earnings test criteria on the availability of a Roth IRA account was eliminated on January 2, 2010. Since then, people of all income levels are entitled to open a Roth account and avail its benefits. |
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If you too are planning to make Roth contributions to save enough for your retirement, here are a few important guidelines for Roth IRA:
- You can start a Roth IRA account in two ways, either by making the contribution in cash or by converting a traditional IRA or similar account into Roth.
- While the Roth contributions are never tax-deductible, the earnings and distributions are free of taxes. However, this rule applies only if the distributions are made after completing the age of 59.5 years and the Roth account has been functional for at least 5 years.
- Early withdrawals made before reaching the age of 59.5 years are not subject to taxes or penalties. The rule applies in case of an early death of accountholder, disability as described by IRC (Internal Revenue Code), or purchase of the first house of up to $10,000.
- Roth IRA contributions are protected by majority of U.S. States in case a bankruptcy is declared by the accountholder. However, the laws pertaining to this may vary from one state to another.
- Although immediate tax breaks are not achieved on opening a Roth IRA Account, distributions and withdrawals grow tax-free eventually.
- At present, the Roth contribution limit is $4000 per year. It is extended to $5000 in case of accountholders above 50 years of age. As a thumb rule, your contributions cannot exceed your income at any point of time. For instance, if your annual income is $2000, you are entitled to make an annual contribution of up to $2000 only.
- In order to be eligible to open Roth IRA, your income should be in form of salary, wages, bonuses, professional fee, or tips. Any income gained from investments or other unearned sources is not taken into account. However, the rule is relaxed for a non-working spouse. Guidelines for starting the Roth Spousal Individual Retirement Account are laid down in detail in Chapter 2, IRA Arrangements - IRS Publication 590. Income level guidelines are also outlined in the same.
- Finally, there is no age limit prescribed for making any contributions to a Roth IRA account.
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