Do You Qualify To Contribute To A Roth IRA?

A Roth IRA might just be the best retirement plan for you or a strong complement to your existing investment vehicles. One advantage of a Roth IRA over a Traditional IRA is funds are not taxed once you begin to make withdrawals.

Minimum distributions are also not required and you can make contributions past age 70 1/2, which differs from the requirements of a Traditional IRA. For complete information, please refer to the IRS Publication 590, “Individual Retirement Arrangements.” For basic information on what requirements need to be met in order to invest in a Roth IRA, please continue reading below.

Contribution limits:
For 2010, contributions of up to $5,000 are allowed each tax year if you are age 49 or younger. If you are age 50 or older the annual limit is $6,000. However, you cannot invest more money than you make annually into an IRA. For example, if you were to earn $3,000 total income in 2010 from a part time job then that is the maximum amount that could be contributed to an IRA.

Income limits:
In order to contribute to an IRA, you need to be paid a salary of some kind. This could be wages, tips, or bonuses. If you do not receive a wage you cannot contribute to an IRA.

There is an exception to this. Roth IRA accounts can be opened if one spouse does not work and the spouses file a joint tax return. The wage-earning spouse can open and contribute to a Roth IRA for his or her spouse.  This is an easy way to salt away twice as much money for retirement.

If your income is over IRS limits, you cannot open a Roth IRA. Your earned income must be below or meet the following criteria:
-$177,000 for a joint tax return
-$120,000 for a single tax return, head of household, married but filing separately