Roth IRA

Recommended if you:

  • Want tax-free withdrawals after retirement
  • Wish to have a federally-insured retirement program
  • Have earned income from employment that you can invest
  • Have a higher income which prohibits you from making a deductible contribution under a Traditional IRA
  • Want an IRA that allows you to postpone distributions for as long as you like and allows you to continue using earned income to make contributions even after age 70 1/2

Important Facts

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  • Unlike the Traditional IRA, the Roth IRA contribution is not tax deductible.
  • Earnings grow tax-deferred; if you do not make any withdrawals for at least five years, earnings become tax-free when you make a qualified withdrawal.
  • Allowable contribution amounts are based on age and adjusted gross income.
  • Early withdrawal penalties may apply.

Common Questions Regarding Roth IRAs

What Is a Roth IRA?

A Roth IRA is an individual retirement account that allows only nondeductible contributions but features tax-free withdrawals for certain distribution reasons after a five-year holding period.

The term "tax free" means free from federal income taxes.

Am I Eligible for a Roth IRA?

There are two requirements for eligibility to contribute to a Roth IRA: you must have compensation (or your spouse must have compensation) and your modified adjusted gross income (MAGI) cannot exceed certain limits (see tables below).

How Much Can I Contribute Each Year?

Contribution Limits