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Contributions to a Roth IRA
Roth IRA Eligibility
Unlike Traditional IRAs, there are no age limitations on opening a Roth
IRA account. The limiting factor for contributions is your taxable income.
Any single person can open a Roth account and fund it up to either the set Annual
Contribution Limit or the maximum income for that individual that year (if you make
$3,000 in a year, only $3,000 can be contributed even though the annual limit may
be $4,000). If you are a parent trying to teach your child about investing,
opening a Roth IRA and matching their earnings for them may be a step in
the right direction.
On the other end of the spectrum, there are maximum income amounts that limit who
may contribute to a Roth IRA Account. Your Adjusted Gross Income
must be less than certain values each year for you to be eligible for contribution.
Roth IRA contributions can be made in a lump sum or in increments.
Contributions follow the tax year instead of the calendar year, so you have until
tax day in midApril to contribute to last year's contribution window.
Contribution Limits for Roth IRAs
Both Roth and Traditional IRA accounts have maximum annual contribution
limits. You may only contribute up to the set annual limit or your annual
income, so if you had no reportable income, you can not contribute.
2007

$4,000

$5,000

2008

$5,000

$6,000

2009

$5,000

$6,000

2010

$5,000

$6,000

2011

$5,000

$6,000

2012

$5,000

$6,000

Cost per Paycheck to Maximize Contributions
Monthly 
$416.67 
$500.00 
Twice a Month 
$208.33 
$250.00 
BiWeekly 
$192.31 
$230.77 
Weekly 
$96.15 
$115.38 
After 2008  The annual Roth IRA contribution limits
will adjust based on inflation in $500 increments. Therefore, the next contribution
limit will be $5,500 once inflation reaches that point.
AGI  There are Adjusted Gross Income (AGI) limits that define
how much you are able to contribute to your Roth per year. If you are a single filer
and make less than $95,000 or are a joint filer making less than $150,000, you are
eligible for the full contribution amount. If you are above these levels, it is
still possible to contribute, but to a lesser degree.
Over Contributing to a Roth IRA
I know you're excited about saving for retirement, but you accidentally contributed
more than you are permitted. Now what? There is a 6% tax applied to the contributed
funds over your allowable limit. Since Roth accounts allow contributions to be withdrawn
at any time, you can withdraw the overage before tax day and avoid any taxes. The
IRS will treat the overcontribution as having not occurred if it is withdrawn from
the account before the end of the tax year. Any earnings on the excess contributions
is considered taxable income.
Next: Compare Traditional to Roth IRA's
Page last modified 12/31/1600