The Fundamental Roth IRA Contribution Rules
It is very important to know the Roth IRA contribution rules so that you can take full advantage of your retirement savings opportunities. This article will go over the main rules that affect your contributions that you need to know.
The first thing you need to learn about are the rules that affect how much you are able to contribute each year. There are 3 main factors that the IRS uses to determine this level: Age, Tax filing status, and Modified Adjusted Gross Income (MAGI).
Your age will determine your maximum contribution limit, which as of 2011 is $5,000 if you are under 50 and $6,000 if you are over 50. The reason for this extra cushion is so people can 'catch-up' if needed during the last period of their career to set themselves up securely for retirement.
Depending on whether you file as Single, Married- jointly, or Married-separated, there are different income brackets that will determine your contribution levels. The worst filing status from an owner's perspective is married but separated. It is here that your maximum contribution is almost always limited, if allowed at all. Please note however, that if you have not lived together at all for the year your essentially considered 'single' for the purposes of your contribution. These rules are set in place so that people cannot take advantage of the system and effectively 'double contribute' with their spouse.
Rules for Contributions to IRAs - Traditional vs. Roth
It is also important to make note of the IRA contribution rules when you have more than one type of account. You are allowed to contribute to more than one account, but this limit cannot exceed your maximum contribution. For example, if your maximum contribution is $6,000, you could contribute $3,000 to both your Traditional IRA and your Roth IRA, but if you put $6,000 in your Roth IRA you would not be able to contribute to your traditional account.
When and Where to Make Contributions
Finally you need to know when and where to make your Roth IRA Contributions. You MUST make your contributions before the tax deadline of the following year, which is usually in mid-April. For example, in most states this year the deadline is April 17, 2012.
In regards to where to make your contributions, you can set-up and how to manage your account online at almost all of the major banks. In most cases it's as simple as signing onto a website and doing some online banking.
The first thing you need to learn about are the rules that affect how much you are able to contribute each year. There are 3 main factors that the IRS uses to determine this level: Age, Tax filing status, and Modified Adjusted Gross Income (MAGI).
Your age will determine your maximum contribution limit, which as of 2011 is $5,000 if you are under 50 and $6,000 if you are over 50. The reason for this extra cushion is so people can 'catch-up' if needed during the last period of their career to set themselves up securely for retirement.
Depending on whether you file as Single, Married- jointly, or Married-separated, there are different income brackets that will determine your contribution levels. The worst filing status from an owner's perspective is married but separated. It is here that your maximum contribution is almost always limited, if allowed at all. Please note however, that if you have not lived together at all for the year your essentially considered 'single' for the purposes of your contribution. These rules are set in place so that people cannot take advantage of the system and effectively 'double contribute' with their spouse.
Rules for Contributions to IRAs - Traditional vs. Roth
It is also important to make note of the IRA contribution rules when you have more than one type of account. You are allowed to contribute to more than one account, but this limit cannot exceed your maximum contribution. For example, if your maximum contribution is $6,000, you could contribute $3,000 to both your Traditional IRA and your Roth IRA, but if you put $6,000 in your Roth IRA you would not be able to contribute to your traditional account.
When and Where to Make Contributions
Finally you need to know when and where to make your Roth IRA Contributions. You MUST make your contributions before the tax deadline of the following year, which is usually in mid-April. For example, in most states this year the deadline is April 17, 2012.
In regards to where to make your contributions, you can set-up and how to manage your account online at almost all of the major banks. In most cases it's as simple as signing onto a website and doing some online banking.
