The Mendel Law Firm, L.P.

Attorneys & Counselors

Call Now: (281) 759-3213

LP Payment button
Home » BLOG » Roth IRA Basics

Roth IRA Basics

by

Unlike a traditional IRA, which offers tax-deferred growth for your retirement savings, a Roth IRA offers tax-free growth. Your contributions are not tax deductible, but after you reach age 59 ½ , the distributions you take from your Roth are not taxed – and this includes the money that initially went into the account as well as the interest earned on those funds.

There are some pretty strict restrictions on who can contribute to a Roth IRA, and how much can be contributed each year. First, the income limits:

  • If you’re single, you can contribute the maximum to your Roth as long as your Modified Adjusted Gross Income (MAGI) is below $107,000. If your income is in the $107,000 – $122,000 range, then the amount you can contribute in that year is phased out. If you make more than $122,000, you’re ineligible to contribute to a Roth.
  • For married couples filing jointly, the limits are slightly more generous. If your MAGI is below $169,000, you’re allowed to contribute the maximum to your Roth. The amount you can contribute is phased out if your income is between $169,000 and $179,000. And, if your MAGI is more than $179,000, you can’t contribute to a Roth IRA.

So, what is the maximum contribution allowed each year? For 2011, if you’re under age 50, you can contribute $5,000 to your Roth. If you’re 50 or older, that limit is increased to $6,000. You’re also limited to contributing an amount equal to your earned income for the year. So, if you only earned $4,000 in a given year and rounded out your finances with investment income, you can only contribute $4,000 to your Roth.

Unlike a traditional IRA, a Roth IRA is not subject to Required Minimum Distributions. This means that  if you don’t need the money in your account to cover living expenses during your retirement, you can use your Roth to pass on wealth to your spouse or other beneficiaries.

Stephen A. Mendel, Estate Planning Attorney
Latest posts by Stephen A. Mendel, Estate Planning Attorney (see all)

About Stephen A. Mendel, Estate Planning Attorney

Mr. Stephen Mendel is an attorney who focuses a substantial part of his practice on estate planning. Mr. Mendel’s guiding principle is to provide his clients with quality legal services tailored to each client’s specific needs and goals.