Here are our most frequently asked questions about Roth IRAs

What is a Roth IRA?

A Roth Individual Retirement Account is an after-tax investment vehicle for retirement-focused investing. Contributions to a Roth IRA are made with after-tax money; the account owner does not get a tax deduction on them. The tax advantages come later: Funds held in a Roth IRA can be invested in numerous types of securities funds, and more through various account providers. All of the income they earn grows tax free. When funds are withdrawn at retirement, they are not taxed. (By contrast, contributions to a Traditional IRA are tax-deductible in most cases, but withdrawals are taxed at regular income-tax rates.)

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. In the past, many investors who earned above the annual income limits for Roth IRAs were restricted to other retirement products. Eventually, Roth IRA restrictions were loosened, opening up the Roth IRA to higher-income investors who previously had exceeded income limitations.

Do I Qualify for a Roth IRA?

The majority of the public does qualify for a Roth IRA. The only requirements to open a Roth IRA are that contributions are “earned income” and that the investor’s annual income falls below a designated threshold. Learn more on our Roth IRA Eligibility page.

How Much Can I Contribute Annually to a Roth IRA?

Individuals under the age of 50 may contribute up to $5,500 per year. If you are age 50 or over, you can contribute up to $6,500. These numbers are dependent on falling below qualifying income limits.

Can I Contribute to a Roth IRA in Addition to a Traditional IRA?

Yes, but the sum of all contributions cannot exceed the annual IRA contribution limits for your age and income level.

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

All “qualified” Roth IRA distributions are tax-free. A distribution is deemed “qualified” when money has been in the account for at least five years and the owner is at least 59½ years old, or has become disabled, dies, or is using up to $10,000 towards a first-time home purchase. In addition, owners can withdraw their contributions only (not the money—earnings—those contributions have earned) at any time without paying taxes (that’s because they have already paid taxes on those contributions).

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

You can make contributions to your IRA as long as you are earning income. Roth IRA contributions must be “earned income.” This is different from Traditional IRAs: You cannot contribute to a Traditional IRA starting the year that you reach age 70½.

At Some Point Am I Required to Begin Taking Distributions?

No. This is a major difference between Roth IRA and Traditional IRA Accounts. Owners of Traditional IRAs are mandated to take required minimum distributions (RMDs) after age 70½. Owners of Roth IRAs never have RMDs during their lifetime. (However, if you inherit a Roth IRA from someone else, you will be required to take distributions from that inherited Roth.)

Can I Transfer the Money in My Traditional IRA to a Roth IRA?

Yes. The government passed legislation making Roth IRA conversions open to more of the public starting in 2010. Read more by visiting our Roth IRA Conversion page.

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