Contributions To A Roth IraAlright, lets assume that you are in the acceptable earned income range to make a contirbution to a Roth Ira. Note that if you are over 50 you can make an additional contribution. This is referred to as a catch-up contribution. YEAR
UNDER 50
OVER 50
If you have a regular Ira, it can be tranfered to a Roth Ira (rolled over) without the early 10% withdrawal fee. Remember though, that you must delcare that money as income on that year's taxes. None of the money in a Roth Ira is taxable if you have owned it for more than 5 years and you are over 59.5 years old. That means the money the Roth Ira has earned over the period of its existence is not taxable either. There are special exceptions when a Roth Ira can be withdrawn without penalty. In these instances the withdrawal is considered a 'qualified distribution'. They are: 1. If the taxpayer is over 59.5 years of age. 2. Payment is made to a beneficiary after the taxpayer dies. 3. If the withdrawal is made for a first time purchase of a home. 4. If the taxpayer has become disabled. It is best to try to contribute the maximum amount allowed to your Roth Ira as it has a 'use-it-or-lose it' feature. If you are only able to contribute, lets say $2000 in 2007,(see chart above), you cannot carry the other $2000 over to 2008. . |