Roth IRA Eligibility

The Roth IRA, as we’ve covered here many times, represents a very valuable retirement savings vehicle.  There are several reasons that the Roth IRA is so valuable, including:

• qualified withdrawals are tax free
• withdrawal of regular contributions is available at any time for any reason
• there is never a Required Minimum Distribution for the original account owner

With all of these benefits, you can see why the Roth IRA has become a very popular option for retirement savings.  So the question now becomes: Am I eligible to contribute to a Roth IRA?

Roth IRA Eligibility

The eligibility requirements for a Roth IRA are as follows:

1. You must have earned income.  This means you receive compensation in the form of wages, salaries, tips, professional fees, bonuses, commissions, self-employment income, nontaxable combat pay, and taxable alimony or maintenance.
2. Your Modified Adjusted Gross Income (MAGI) must be less than:
   1. $169,000 (for 2009) if your filing status is Married Filing Jointly or Qualifying Widow(er); or
   2. 116,000 (for 2009) if your filing status is Single, Head of Household, or Married Filing Separately (and you did not live with your spouse at any time during the year); or
   3. $10,000 if your filing status is Married Filing Separately and you lived with your spouse at any time during the year.

And that’s it.  You are not limited by participation in an employer-sponsored plan as you are with deductibility of a traditional IRA.  There are a few limiting factors, though:

1. You cannot contribute more than your earned income.
2. A spousal contribution is allowed, as long as the total of contributions to personal and spousal IRAs doesn’t exceed the total of your personal and your spouse’s earned income.
3. You are limited by an annual amount (for 2009 it’s $5,000 with an over age 50 “catch up” of $1,000).  This means that your total IRA contributions (traditional and Roth added together) cannot exceed that annual limit.
4. When your MAGI reaches a certain amount, your contribution amount will begin to be limited.  You can visit this page for more details on the MAGI limits and how they are applied.

Note:  Yes, the gauntlet has been tossed out there… we’ve increased from a Roth Trifecta to a full-fledged Superfecta of Roths.  Incidentally, in the wild, I believe a group of Roths is known as a “proth”.

One million extra points for the first comment to name all four of our Roth IRA “hosts” so far.

Be Sociable, Share!

• 

I can learn from you, you can learn from me - please leave your comments and links!

 Jim Blankenship, CFP®, EA, is an expert in personal retirement, IRAs, and tax issues, with more than 25 years of experience in the industry. Read more from this author