Roth IRA Qualifications: The Rules To Qualify Plus What To If You Don’t

A few years back I was planning out my retirement scanning through various ways to save for my retirement and one option I came across that interested me was the Roth IRA.  The reason I was so impressed with it was because it allowed me to stick after tax dollars into the account without having to pay taxes on the earning I made when I retired.  This it literally the only retirement account of its kind to do this.

In this article I’m going to show you what it takes to qualify for a Roth IRA and if you don’t I will also give you some suggestions as to other places you can turn to.

Do I Qualify For A Roth IRA

First off their in no age limit to apply for this type account.  You can be 16 or you can be 60 it does not matter.  However in order to open the account you are required to be earning some sort of income from a job or some sort of asset such as real estate.

Second, their are contribution limits as to how much you can put into a Roth account.  For anyone under the age of 50 you can only contribute up to $5000 as of 2010.  However if you are over the age of 50 you will be allowed to contribute an extra $1000 on top of the already $5000 contributed.

Third, contributions can be withdrawn up to 5 years after funding an account.  However any earning that you make cannot be withdrawn until the age of 59 and a half.  You will also only be able to withdraw the money before retirement for a specific reason also such as facing a hardship or buying your first home.

Fourth, spouses can also contribute income as well.  However in order to do this the couple has to be filing jointly on their tax returns and they must also be earning an income as well.

Fifth, contributing to other retirement plans such as your companies 401k program or 403b program will not effect the amount of money you will be able to contribute to your Roth IRA account.

The sixth and final Roth IRA qualification is that you cannot exceed certain income limits.  First off if you are filing a single tax return you will be able to earn up to as much as $120,000 adjusted gross income before they will not allow to contribute anymore.  If you are filing jointly you can earn as much as $177,000 adjusted gross income.

What To Do If You Don’t Qualify

So there  you have it, the qualifications for Roth IRA accounts.  However you might be wonder what you should do if you can’t meet those guidelines.   So here are a few ideas.

  • Look into work related retirement accounts. If you can’t qualify for a Roth IRA you may be able get on your companies 401k or 403b plan.  However these accounts will have different tax rules.  They will also allow you to contribute as much as $16,500 a year under the age of 50 and if you are over 50 you can put in as much as $22,000.
  • The next option is a non qualified annuity. The benefit with this type of retirement investment is that they can still give you the tax deferred earning like your 401k plan but their no contribution limits.  However one downside to annuities is that they can be very pricey and expensive when compared to similar investments.
  • Solo 401k or Simple IRA Plans. Finally, if those two options don’t work the final option you may be able to consider is if you own a business.  If you are a sole proprietor with no employees you may be able to consider the solo 401k which is similar to the regular 401k however it is meant for the one person business owner.  Another option is the simple IRA.  This is an employee based retirement plan that allows you to contribute as much as $11,500 under the age of 50 and as much as $14,000 over the age of 50.

What Works For You

Obviously, the Roth IRA qualifications have more strings attached but they also have some big benefits that I explained earlier.  If you would like to learn more about how the Roth or any of the other accounts my be able to help you out saving for retirement, contact you financial professional and they should be able to help you out.

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