How does a Roth IRA differ from a regular IRA?

Contributions to a Roth IRA are not tax-deductible, nor are distributions of earnings from a Roth IRA taxable if the distribution is “qualified”.

  1. To be a “qualified distribution”, you must meet BOTH of the following constraints:
    • You are age 59 ½ or older.
    • You have had the Roth IRA account for at least 5 years.
  2. Non-qualified distributions of earnings are subject to ordinary income taxation and a 10% premature distribution penalty if the distribution occurs prior to age 59 ½.
  3. Withdrawal of your original contributions are never taxable no matter when they are withdrawn—nor are they subject to a 10% premature distribution penalty.

Are the limits on contributions to Roth IRAs the same as a regular IRA?

Yes, and the total you make to your regular IRA and a ROTH IRA cannot exceed the dollar limits in effect for the current year.

Are there eligibility conditions for making a Roth IRA contribution?

  1. Yes. Conditions are your filing status and your “modified adjusted gross income” or MAGI
    1. Filing Single, Head of Household, or Married Filing Separately and you did not live with your spouse at any time during the year
      1. Your MAGI is $118,000 or less: full contribution up to the limit
      2. Your MAGI is more than $118,000 but less than $113,000: a reduced amount
      3. Your MAGI is $133,000 or more: no Roth contribution
    2. Married Filing Jointly or Qualifying Widow(er)
      1. Your MAGI is $186,000 or less: full contribution up to the limit
      2. Your MAGI is more than $186,000 but less than $196,000: a reduced amount
      3. Your MAGI is $196,000 or more: no Roth contribution
    3. Married Filing Separately and you had lived with your spouse at any time during the year
      1. Your MAGI is $10,000 or less: a reduced amount
      2. Your MAGI is $10,000 or more: no Roth contribution
  2. There are no income restrictions when making Roth contributions to a 401(k).
  3. Unlike when determining if your IRA contributions are deductible, the fact that you are “covered” by a workplace retirement plan is not a consideration.