Roth IRAs, named after former Senator William Roth, are individual retirement accounts that offer tax-free growth and tax-free withdrawals in retirement. Unlike traditional IRAs, contributions to Roth IRAs are made with after-tax dollars, meaning you don’t receive an upfront tax deduction. However, the tax-free withdrawals in retirement can be a significant benefit, especially if you expect to be in a higher tax bracket when you retire.
Eligibility Requirements
To be eligible to contribute to a Roth IRA, you must meet the following requirements:
- Earned Income: You must have earned income from employment or self-employment.
- Age: There is no minimum age to contribute to a Roth IRA, but you must be under age 59½ to make regular contributions.
- Income Limits: There are income limits for Roth IRA contributions. For 2023, the phase-out range for Roth IRA eligibility is $138,000 to $153,000 for single filers and $218,000 to $228,000 for married couples filing jointly. Above these income limits, you cannot contribute to a Roth IRA.
Contribution Limits
The maximum amount you can contribute to a Roth IRA is $6,500 for 2023 ($7,500 if you’re age 50 or older). If your income is above the phase-out range, your contribution limit is reduced.
Income Limits and Contribution Limits for Roth IRAs
| Filing Status | Income Limit for Roth IRA Contributions | Maximum Contribution Limit |
|---|---|---|
| Single | $138,000 – $153,000 | $6,500 ($7,500 if age 50 or older) |
| Married Filing Jointly | $218,000 – $228,000 | $6,500 ($7,500 if age 50 or older) |
Additional Considerations
- Spousal IRAs: If your spouse does not have earned income, you may be able to contribute to a spousal Roth IRA on their behalf.
- Backdoor Roth IRA: If you earn too much to contribute directly to a Roth IRA, you may be able to use a backdoor Roth IRA to convert funds from a traditional IRA to a Roth IRA.
- Required Minimum Distributions (RMDs): Unlike traditional IRAs, Roth IRAs do not have required minimum distributions (RMDs). This means you can leave your money in the account and continue to grow tax-free for as long as you like.
Roth IRAs can be a valuable retirement savings tool for those who qualify. If you meet the eligibility requirements and income limits, consider contributing to a Roth IRA to take advantage of the tax-free growth and tax-free withdrawals in retirement.
EVERYTHING you need to Know about a Roth IRA | What it is, What to buy, Eligibility, & Taxes
FAQ
Who Cannot participate in a Roth IRA?
Who qualifies for a Roth IRA?
Can everyone have a Roth IRA?
Can I contribute to a Roth IRA if I don’t have earned income?
Who can contribute to a Roth IRA?
With traditional IRAs, anyone who earns taxable income can contribute no matter their income. But the IRS prohibits you from contributing to a Roth IRA if your modified adjusted gross income (MAGI) exceeds a cap set by the IRS. Eligibility to contribute to a Roth IRA is based on household income.
Is there an age limit on Roth IRA contributions?
But with the December 2019 passage of the Setting Every Community Up for Retirement Enhancement (SECURE) Act, there is no longer an age cutoff on traditional IRA contributions. Also, the fact that you participate in a qualified retirement plan has no bearing on your eligibility to make Roth IRA contributions.
Can a 70 year old contribute to a Roth IRA?
No, the Internal Revenue Service (IRS) allows Roth IRA contributions at any age, as long as you have earned income. This means that even if you’re working well into your 70s, you can still contribute to a Roth IRA. While there is no age limit for contributing to a Roth IRA, there are income limits for eligibility.
Who can open a Roth IRA?
Anyone can open a Roth IRA. 1 However, only those with earned income within the IRS’s annual limits are eligible to contribute.