What is a Roth IRA ?
A Roth IRA is a special individual retirement account (IRA) where you pay taxes on money going into your account, and then all future withdrawals are tax free.
How Does a Roth IRA Work ?
Roth IRAs are funded with after-tax dollars, this means that the contributions are not tax-deductible. However, once withdrawals are made, the money is tax-free.
Who Qualifies for a Roth IRA ?
Anyone who has earned income can contribute to a Roth IRA, as long as they meet certain requirements concerning filing status and modified adjusted gross income (MAGI).
Income Limits for Roth IRA
If you file taxes as a single person, your MAGI must be under $153,000 to contribute to a Roth IRA, and if you're married and file jointly, your MAGI must be under $228,000 for tax year 2023.
Contribution Limits for Roth IRA
In 2023, an individual's annual Roth IRA contribution limit is set at $6,500 and those 50 and older will be able to contribute up to $7,500.
Roth IRA Withdrawal Rules
As long as you are 59½ years old or older and have owned the account for at least five years, you can often withdraw earnings without incurring penalties or taxes.
Allowable Investments in Roth IRA
Almost any type of investment is permissible inside an IRA, including stocks, bonds, mutual funds, annuities, UITs, ETFs, and even real estate.
How to Open a Roth IRA ?
At brokerages, banks, credit unions, life insurance companies, mutual fund companies, and other financial institutions, you can open a Roth IRA.