Roth IRA Rules Continued

October 13th, 2006

Roth IRA Rules (Continued)

Recap of major differences between Roth IRA rules and Traditional IRA Rules:

While Traditional IRA Rules allow eligible individuals with any income size to contribute to Traditional IRA individual retirement accounts, Roth IRA rules do not. Simply put, if you earn a lot of money, then you can set up a Traditional IRA but not a Roth IRA individual retirement account.

Another major difference between Roth IRA rules and Traditional IRA Rules is the age eligibility. Anyone can open a Roth IRA account providing he or she satisfies the income limit requirement under Roth IRA rules, whereas you have to be under 70½ to contribute to a Traditional IRA account.

Roth IRA rules on contributions

Roth IRA rules are very specific about how much income, called modified adjusted gross income or MAGI, you are allowed to make before you are no longer eligible to set up a Roth IRA individual retirement account. The table below shows modified adjusted gross income limits and how much you are allowed to contribute to a Roth IRA account.

Modified Adjusted Gross income (MAGI)	Single	Married, Filing jointly
Less than $95,000	full contribution	full contribution
$95,000 – $109,999	partial contribution	full contribution
$110,000 – $149,999	Not eligible	full contribution
$150,000 – $159,999	Not eligible	partial contribution
$160,000 or more	Not eligible	Not eligible

Roth IRA rules of deductible contribution

Roth IRA rules do not permit deductible contributions to Roth IRA individual retirement account.

Roth IRA rules for non-deductible contributions

Unlike contributions to Traditional IRA accounts, only non-deductible contributions to Roth IRA accounts are permitted. See “Total Contributions” for contribution limits to Roth IRA accounts under Roth IRA rules.

Roth IRA rules for catch up contributions for Roth IRA

Catch up contributions for Roth IRA individual retirement accounts, under the Roth IRA rules, are available for individuals age 50 or over. Roth IRA account owners of 50 and over may make additional catch-up IRA contributions as specified by Roth IRA rules and other IRA Rules. The maximum contribution limit is increased by $1,000 for year 2006 and thereafter. The contribution limit for catch up IRA contribution under both Traditional IRA Rules and Roth IRA rules used to be just $500.

Contribution Deadline for Roth IRA

Under the Roth IRA rules, you may contribute or put money into your Roth IRA accounts no later than tax filing due date. No extensions.

IRA Rules