Roth IRA Eligibility
Everyone is different and every situation is different too! You need to make sure that you’re eligible for the advantages (and disadvantages) that a Roth IRA provides investors who make under $122,000 ($177,000 for couples) every year. While your income might change over the years, it’s best to take advantage of lower tax brackets while you have them! But are you eligible for the Roth or should you go with the traditional IRA account?
How Old Are You?
Age is a contributing factor in your worthiness for a Roth IRA. You can only contribute funds that you earn, so as long as you keep earning money every year you’ll be able to keep contributing to an IRA. You can continue to contribute to your IRA after retirement, but you’ll need to be careful and do it while you’re young because compound interest is really what makes the Roth account grow into a great cushion for your retirement!
How Much Do You Earn?
Earnings are important, because only people who are considered “middle class” are allowed to have a Roth IRA, as opposed to a traditional IRA. This means you’ll need to earn no more than:
- $122,000 a year as a single filer
- $177,000 as a couple filing jointly
Adjusted gross income (AGI) is an important factor, so your take home pay might be different; always check over how much you’re actually making and use a Roth IRA calculator to make sure that you meet the minimum or maximum requirements for your account.
Know Your Contribution Limits
There are contribution limits for your Roth IRA, and you will not be able to put in more than $5,000 a year. If you’re over the age of 50, you can do “catch up” contributions that allow you to put in $1,000 a year for the last five years to catch up, but you can’t do this if you’re under the age of 50. It’s just a feature for people nearing retirement!
If you try to put in more than the max amount of $5,000 a year, you can be penalized and forced to withdraw your funds. It’s important to note that you can have more than one Roth IRA account and you can put your money across them. Another thing to know is that if you’re married and filing separately, you can’t make a contribution to your IRAs if you earn more than $10,000 a year.