The Roth IRA Income Limits
No matter how we’ve lived during our peak years, all of us deserve to hang up our boots and take a permanent break. At some point in our lives, we all have to go through an inevitable phase: retirement. Making money after retirement is an issue for some, especially since when you’ve retired, it goes without saying that you’re going to live without a job. But with sufficient knowledge of Roth IRA income limits, sustenance shouldn’t be that much of an issue.
Before we talk about Roth IRA income limits, it is important that we talk about the dynamics of IRA’s. IRA’s, or individual retirement accounts when spelled out, are a type of benefit the government provides for retirees. This can either be a trust or custodial fund that can be used by the taxpayer and his/her beneficiaries, or can work as an individual retirement annuity, where an annuity or endowment contract is purchased from an insurance company.
What are the types of Roth IRA Income Limits
There are two main types of individual retirement accounts: the traditional and the Roth. IRA’s first came into being in 1974, with the enactment of the Employee Retirement Income Security or ERISA. In 1998, Senator William Roth of Delaware then sponsored the Roth IRA. The main difference between the two is the method by which contributions are deducted. Contributions to the traditional IRA can either be deductible or otherwise, whereas contributions to Roth IRA’s are always non-deductible. This plays a vital part in Roth IRA income limits.
Aside from the difference between Roth IRA income limits and those of traditional IRA’s, the age limitations between the two also vary. Roth IRA’s allow you to contribute to your account as long as you like, as there is no age limit. However, traditional IRA’s require taxpayers to start withdrawing money from their account as soon as they hit 70 ½ years of age. People who want to save up their money for future generations will find this very advantageous.
How does Roth IRA Income Limits Work?
On to Roth IRA income limits, the US Congress set a limit to who can contribute to individual retirement accounts based on how much they make. The limit was increased from 2007 to 2008, and these limits are still practiced nowadays. The limits are as follows: for single filers, they need to make up to $105,000 yearly to be able to qualify for a full contribution, whereas they have to have an income of $105,000-$120,000 for a partial contribution.
The Roth IRA income limits for joint filers are up to $169,000 to qualify for a full contribution, and $169,000-$179,000 for partial contributors. For married couples filing separately, there is no limit for a full contribution, while they need to make up to $10,000 a year for a partial contribution.
Roth IRA’s are especially preferred by the majority because of its flexibility—it allows you to withdraw money from your savings whenever you want to. With this in mind, you can indeed take care of the future of you and your loved ones by knowing about Roth IRA income limits and making the most out of them. Also, you may want to check the Roth IRA income limits 2011.