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Roth IRA Limits

A look at the world of Roth IRA limits and more investment details about these retirement plans.

Welcome to Roth IRA limits, where we explain the ins and outs of the Roth IRA.  The Roth IRA savings plan is one of the more popular retirement savings plans, and it allows people to make annual contributions with tax benefits.  When contributions are eventually withdrawn, they’re done without any tax imposition on the interest they’ve accrued over time.

We’re going to discuss the Roth IRA limits and many other characteristics and benefits of these plans, and hopefully your understanding as to how they work will be fully up to speed by the time you’re done here.  We’ll even help you decide where you may want to open a Roth IRA account for yourself.

Anyway, the Roth IRA works in a simple manner.  Each year, you’ll have the ability to make a contribution into your Roth IRA account, all of it subject to the Roth IRA limits.

Upon withdrawal from this account, tax benefits accrue to the person who is withdrawing. Although, withdrawals are tax free as  mentioned earlier, they are subject to certain limits. Those limits, we shall take a careful look at below:

1. For a person to qualify to make a withdrawal after a period of five years, such a person must have attained the age of fifty-nine and a half years of age. Alternatively, a person who has suffered a disability may also make such a withdrawal after a period of five years.

2. In order for the money withdrawn to qualify for the tax-free benefit, it must be for the purpose of buying, building or re-building the person’s first home.

3. The contributions made by one person must however, not exceed $4, 000 or a hundred percent of the person’s gross adjustable income. The lesser option will apply in this case.

4. The source of money for an individual’s contribution must also be from the person’s compensation income which means that it is derived from the wages he has earned or income from his self-employment.

5. Contributions exclude money amassed from investments and pension schemes.

6. Individuals are also limited by the amount which they have contributed to the traditional IRAs up until the point where they decide to get involved in the Roth IRA. This is because the law does not allow the total contribution by one individual to exceed the amount due to be contributed under the traditional IRA and Roth IRA. In other words, someone who has already started contributing to the traditional IRA will have a reduced amount to contribute under the Roth IRA.

7. The Adjusted Gross Income is also a basis for Roth IRA limits. If a person’s AGI is less than $95,000, he is eligible but anyone who’s AGI is above $115,000 or more will not qualify to contribute to the Roth IRA.

8. The AGI limitation also affects couples although it acts if they are filing joint returns. In the event that they file joint returns, their AGI has to exceed $150,000. If either member of the couple has AGI exceeding $100,000 or they file separately, they are ineligible to contribute under the Roth IRA.

Therein lie the basics about Roth IRA limits and other impositions.  Read some of the other various articles we’ve written about these accounts to further your understanding as to how they work.