The Roth IRA (named after Senate Finance Committee Chairman William Roth) is an IRA to which contributions are not deductible, but distributions (including earnings) can be withdrawn tax-free under certain conditions.Eligibility
Single taxpayers with an adjusted gross income:
Of less than $124,000 for 2020 are eligible to make a full contribution;
Between $124,000 - $138,999 may make partial contributions;
Over $139,000 are not eligible to contribute.
Married taxpayers filing jointly with an adjusted gross income:
Of less than $196,000 are eligible to make a full contribution;
Between $196,000 - $205,999 may make partial contributions;
Over $206,000 are not eligible to contribute to a Roth IRA.
Contributions are not deductible.
The maximum contribution allowed, either to a Traditional IRA, Roth IRA, or a combination of each, is the lesser of 100% of earned income or $6,000 in 2020.
A married couple filing jointly can contribute up to an additional $6,000 for a non-working spouse, as long as the contributions do not exceed their combined earned income. Catch-up contribution for individuals age 50 and older is $1,000.
For 2020 and later, Roth IRA holders do not have an age limit on making contributions, as long as they have earned income.
Contribution deadline is the individuals tax return due date (excluding extensions).
Distributions can occur penalty free and tax free if "qualified."
A distribution is considered qualified if the assets have been held in the Roth IRA for a minimum of five taxable years (beginning with the first taxable year for which a Roth contribution was made) and when one of the following events occur: 1) attainment of age 59 1/2; 2) disability; 3) the purchase of a first home; or 4) death.
Distributions from the Roth IRA are not mandatory at age 72.
A non-qualified distribution is subject to tax and penalty to the extent that it exceeds total contributions. Exceptions may apply.
A rollover from one Roth IRA to another must occur within 60 days from the date of the withdrawal or it may be considered a distribution. One indirect rollover may occur per individual in each 12-month period.
Before making decisions about Individual Retirement Accounts, investors should consult their tax advisor. Stifel Independent Advisors and Stifel do not offer tax advice.
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