What are the basic Roth IRA rules and regulations?

That’s a great question, because…

Before you open your account, you need to know the basic rules of the game.

Fortunately, the IRS has made the rules fairly simple.

The following topics address some of the basic rules…

1) Taxation
2) Earned Income
3) Age
4) Income Limits

Learn the IRS rules in regard to each of these topics, and you’ll know just about everything you need to know…

1) Taxation

You must fund your Roth IRA contributions with after-tax income.

Unlike a Traditional IRA, a Roth is not tax deductible.

However, this shortcoming is easily offset by the future tax-free growth and tax-free withdrawal of those same contributions…

That’s right. Once you fund your Roth account, you never have to pay income taxes or capital gains taxes on the investing funds or subsequent investment gains ever again!

2) Earned Income

In order to contribute to a Roth, the IRS requires you to have earned income during the taxable year of the contribution…

And the amount of your contribution can not exceed the income you earn for the year.

If your primary source of income is from a current job or business, this shouldn’t be a problem.

However, if you’re retired and living off of a pension or social security, you can only contribute from your qualified income you earn…

You can’t contribute your social security check to your Roth.

3) Age Requirements

IRS regulations don’t institute a minimum or a maximum age for opening or investing in a Roth IRA.

The only requirement is that the Roth IRA account holder fund the account with earned income…

So, if you’re a five-year-old with earned income from a lemonade stand…

Or a ninety-two-year-old with earned income as the local Wal-Mart greater…

Then you meet the age requirement for opening and contributing to a Roth IRA!

In short, there is no Roth IRA age requirement, just an earned income requirement.

4) Income Limits

Eligibility to open a new Roth IRA or contribute to an existing one is limited to people with income in a certain range.

The Modified Adjusted Gross Income (MAGI) maximum limits for a Roth IRA are as follows:

• $169,000 if you’re married filing jointly
• $10,000 if you’re married filing separately but lived with your spouse during the tax year
• $116,000 if you’re single, head-of-household, or married filing separately but did not live with your spouse during the tax year

Additional Rules

In addition to the aforementioned rules, the IRS regulates contribution limits, withdrawals (distributions), available investment options, and other factors.

For detailed information about these Roth IRA rules, visit Britt Gillette’s website, Your-Roth-IRA.com, a site focused exclusively on helping people with self-directed Roth IRAs.

If you’ve been keeping up with my blog posts lately you’ll know I’ve come to adding a few news posts from around the web on this subject. I’ve got a couple more today that are new and updated, so let me know what you think of em…

Opening a Roth IRA for the First Time

I just created an account at Vanguard and opened up my very first Roth IRA and invested in a low-cost index fund. So did Mrs. PT. Sweet! Just in time too. We needed to contribute before we filed our taxes if we wanted the contribution …

Real Estate Relocation in Your Roth IRA on Roids

Has your accountant or financial planner asked if you have given any thought to converting your traditional IRA to a Roth? In 2010, as it stands right now anyway, if you decide to convert your traditional IRA to a Roth IRA, …

Retirement: How much should you save? | Bad Credit NOT!

such as a regular IRA or a Roth IRA, to $5000 (plus another $1000, if gible. And if you need or want to save even mor accouts. You won't get the same advantag depending on which types of investments to put into it, you may still be able …

Hope you enjoy the read as much as I did and please if you have something to say, use the comments form below to let everyone know your thoughts.

Have a great day!

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About The Author

Paul Rogers writes general finance and loan articles for the Loans UK Online website at http://www.loansukonline.co.uk

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