2012 Roth IRA Rules

For the 2012 tax year there are some changes that have been made regarding Roth IRA rules. Below is a summary of those changes.

2012 Income Rules

The 2012 Roth IRA Income Limits have increased $3,000 for single tax filers and $4,000 for married filing joint filers over the 2011 levels.

In 2012 single filers can fully contribute to a Roth IRA if their modified adjusted gross income (MAGI) falls below $110,000.

For those filing "married filing joint" tax returns full contributions can be made to a Roth IRA if the modified adjusted gross income falls below a combined $173,000.

The contribution limit is phased out after $125,000 for single filers and $183,000 for married filing joint filers. If your income is above these limits you will not be allowed to contribute to a Roth IRA in 2012.

2012 Contribution Limits

The 2012 Roth IRA Contribution Limits remain unchanged from the 2011 limits.

All qualifying individuals may contribute $5,000 to a Roth IRA in 2011. Individuals age 50 or older may also contribute a "catch-up" contribution of $1,000.

2012 Age Rules

There are no changes to the age rules with Roth IRAs for 2012. Anyone with earned income that falls under the income rules may contribute to a Roth IRA regardless of age.

One of the benefits of using a Roth IRA over a Traditional IRA is you will never be forced to take distributions from the account regardless of age. You may begin withdrawing your earnings at age 59 and 1/2 without tax or penalty. Contributions may be withdrawn at any age without tax or penalty.

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Comments (4)

1) Is a Roth IRA the right choice for my 20 year old daughter who wants to start saving for reitrement. She does not have a retirement plan at work. Se makes $24,000/yr. 2) Can my husband and I contribute to a Roth IRA if we are both contributing to 457 Plans at work? We make $150,000/yr

1) A Roth could be a very good choice for your daughter since her tax rate is probably quite low right now. Please check with an advisor.2) If your combined income is less than $183,000 and you file jointly, then you should probably be eligible to contribute to a Roth even if you are already involved in a 457.

Is there a cash value on death? I know that for annuities there is none which is why I want to cancel mine. I am really looking for a vehicle that if I spend my life paying in to it, and die before I have the option of using it, my money doesn't evaporate into thin air.

There are specific rules around inheritance, but you are able to leave a Roth IRA to your heirs. In fact, it can be a very good way to manage estate taxes.
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