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Here are our most frequently asked questions about Roth IRAs

Quick Summary

  • Roth IRAs are a tax-advantaged way to save for retirement.
  • For 2019, you can contribute up to $6,000, or $7,000 if you’re age 50 or older.
  • Unlike traditional IRAs, there are no required minimum distributions for Roths.

What is a Roth IRA?

A Roth IRA is a tax-advantaged account for retirement investing. Contributions to a Roth IRA are made with after-tax money. That means you don’t get an upfront tax break. But your contributions and earnings grow tax-free.

And qualified distributions—withdrawals made after you turn 59 1/2 and when the account is at least five years old—are tax-free. Note that traditional IRAs are the opposite. With those, you deduct your contributions the year you make them, and then pay taxes on withdrawals later on.

A Roth IRA is an account, and not an investment itself. After you open a Roth IRA, you choose the investments you want to hold in the account. Common choices include stocks, bonds, mutual funds, index funds, and target-date funds.

What is a Roth IRA Conversion?

A Roth IRA conversion is a rollover from another account type (typically a 401(k) or traditional IRA) into a Roth IRA account.

If you have a 401(k) at work and you leave your job, you have to decide what to do with that money. You can keep it in your original employer’s plan, roll it into your next employer’s plan, cash it out (generally not recommended), or roll it into an IRA. That’s an IRA conversion (or rollover), and you can decide to roll it into a traditional or Roth IRA.

Another reason to do a Roth IRA conversion is if you have a traditional IRA and you want to take advantage of a Roth’s tax-free withdrawals during retirement. Of course, you’ll owe taxes on the conversion now—and those could be substantial. But qualified distributions in the future are tax-free.

This can be a good idea if you are in a lower tax bracket now than you expect to be in during retirement.

Do I Qualify for a Roth IRA?

Most people qualify for a Roth IRA. You can open and contribute to a Roth IRA at any age, whether you’re 1 or 100. To qualify:

  • You must have “earned income” that matches your exceeds your Roth IRA contribution, and
  • Your income must fall below the designated thresholds.

If you don’t have earned income, you may be eligible for a spousal IRA. This is a regular IRA (traditional or Roth) that’s used by married couples. It allows a spouse with earned income to contribute to an IRA on behalf of his or her spouse who doesn’t work for pay.

How Much Can I Contribute to a Roth IRA?

For 2019, you can contribute up to $6,000 each year, or $7,000 if you’re age 50 or older. These numbers are dependent on falling below qualifying income limits. You can make the contribution anytime between Jan. 1 and the tax filing deadline for that year, on or around April 15.

Can I Contribute to a Roth IRA and a Traditional IRA?

Yes, but the sum of all contributions can’t exceed the annual IRA contribution limits for your age and income level. For example, if you’re eligible to make a full contribution—$6,000 for 2019—you could contribute $3,000 to your traditional and $3,000 to your Roth.

Are Roth IRA Withdrawals Always Tax-Free, or Are There Any Limitations?

No, withdrawals aren’t always tax-free. But there are exceptions.

Qualified distributions from your Roth IRA are always tax-free. To count as qualified, the distribution must meet both of these requirements:

  1. If occurs at least five years after you opened and funded your first Roth IRA (even if you’re withdrawing from a different one), and
  2. You take the distribution under one of these circumstances:
    • You’re at least 59 1/2 years old
    • You have a disability
    • The payment is made to your beneficiary or to your estate after your death
    • The money is used to buy, build, or rebuild a home as a first-time homebuyer

Anything else is a nonqualified distribution, and you may be on the hook for both taxes and a 10% early withdrawal penalty.

How Long Can I Make Contributions to My Roth IRA Account?

You can make contributions to your IRA as long as you have earned income—no matter how old (or young) you are.

This is different from a traditional IRA. With those, you have to stop contributing the year you turn 70 1/2. That’s also when you have to start taking required minimum distributions.

Am I Required to Take Distributions?

No. This is a major difference between Roth IRAs and traditional IRAs. Owners of traditional IRAs must start taking required minimum distributions (RMDs) after age 70 ½. Roth IRAs, on the other hand, have no RMDs during your lifetime. However, if you inherit a Roth IRA from someone else, you’ll be required to take distributions from that inherited Roth

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