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Roth IRA: The following information gives the IRS definition of a Roth IRA and also defines who is eligible to contribute to a Roth IRA. The IRS determines eligibility of the Roth IRA based on taxable compensation, income, age, and participation in other retirement plans. Roth IRAs became available in 1998.
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The Roth IRA is not a traditional IRA, a SIMPLE IRA, or an education IRA. Neither a SEP-IRA nor a SIMPLE IRA can be designated as a Roth IRA. Unlike a traditional IRA, you cannot deduct contributions to a Roth IRA. But, if you satisfy the requirements, qualified distributions are tax free. Contributions can be made to your Roth IRA after you reach age 70 1/2 and you can leave amounts in your Roth IRA as long as you live.
Here are some of the benefits of a Roth IRA:
Can I Contribute to a Roth IRA?
Generally, you can contribute to a Roth IRA if you have taxable compensation and you do not exceed the modified AGI (adjusted gross income) based on your filing status. Click here to determine if you can contribute to a Roth IRA based on your filing status. Click here for Roth IRA Contributions Limits.
Can I Contribute to a Roth IRA for my Spouse?
You can contribute to a Roth IRA for your spouse provided the contributions satisfy the spousal IRA limit and you do not exceed the modified AGI (adjusted gross income) based on your filing status. Click here to determine if you can contribute to a Roth IRA based on your filing status. Click here for more information on Spousal contributions.
How Much can I Contribute?
The maximum contribution limit per individual to a Roth IRA is $4,000 ($8,000 per couple). If you are over the age of 50, you can contribute an additional $1,000 in 2007. However, the maximum contribution limit may be reduced by any contributions made to a traditional IRA (but not a SEP-IRA, SIMPLE IRA, or employer sponsored plan) or limited by your modified AGI based on your filing status. Click here to determine if you can contribute to a Roth IRA based on your filing status. If your modified AGI is above a certain amount, your maximum contribution limit is gradually reduced. Click here to figure out your reduction.
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