Roth IRA
The Roth IRA structure in the current year 2011
The contribution limits of 2011 for Roth IRA are almost the same when compared to 2010. Since 3 years which is 2008, the maximum contribution to the Roth IRA in each tax year is $5000. For older people (50 and above) $6000 is the maximum contribution limit to make up lost time for retirement savings. However, the earned income for either single filer or joint tax return filers should be at least as much as the contribution amount.
An individual can hold other IRAs along with a Roth IRA including a 401k or other plans; however, the total contribution to all plans including Roth IRA should not exceed $5000 or $6000 depending on age.
In regular IRAs there are not many income restrictions especially when it comes to making a very high income each tax year. However, Roth IRA is based on marital status and the income of the person concerned. People who earn more than the current specified upper income limit are not eligible for Roth IRA.
If one is not eligible for Roth IRA due to high income, there is another option which usually works. Since, the 1st of January, 2010 Roth IRA is available to all taxpaying citizens irrespective of their income. So, one can convert his traditional IRA account into a Roth IRA. Of course, this involves a few state and federal taxes incurred for the conversion; however, the long term benefits of Roth IRA will be available to the individual.
This move has aroused suspicion in the minds of several critics who believe that the Government is trying to gather as much funding as it can through this move. And, once most people convert to Roth IRA and are about to reach the retirement age, the tax rates would be increased which is around 2020 so the Roth IRA holder who would already be in a high income tax bracket by then would be at a huge loss.
An individual can hold other IRAs along with a Roth IRA including a 401k or other plans; however, the total contribution to all plans including Roth IRA should not exceed $5000 or $6000 depending on age.
In regular IRAs there are not many income restrictions especially when it comes to making a very high income each tax year. However, Roth IRA is based on marital status and the income of the person concerned. People who earn more than the current specified upper income limit are not eligible for Roth IRA.
If one is not eligible for Roth IRA due to high income, there is another option which usually works. Since, the 1st of January, 2010 Roth IRA is available to all taxpaying citizens irrespective of their income. So, one can convert his traditional IRA account into a Roth IRA. Of course, this involves a few state and federal taxes incurred for the conversion; however, the long term benefits of Roth IRA will be available to the individual.
This move has aroused suspicion in the minds of several critics who believe that the Government is trying to gather as much funding as it can through this move. And, once most people convert to Roth IRA and are about to reach the retirement age, the tax rates would be increased which is around 2020 so the Roth IRA holder who would already be in a high income tax bracket by then would be at a huge loss.
