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A Roth IRA (Individual Retirement Account) or the 401K plan that many large and small businesses offer their employees is a sensible solution to help you save towards the time when you are going to retire. It doesn't take a lot to set up such an IRA and then make contributions towards it. However, you need to be aware of certain things with regards to making Roth IRA contributions and below we look at what these are.
First of all, throughout any financial year the amount you contribute to your Roth IRA is limited. Today an individual under the age of 50 can only contribute $4,000. If you are over 50 it is $4,500 or 100% of what your earned income is. Which one it is depends on which is the lesser amount. Also to contribute to IRA's there is no limit on the person's age.
One thing to be aware of when making contributions to a Roth IRA is the restrictions on what your gross taxable earnings can be. An individual must earn less than $110,000 per year. For a married couple who file a joint return the gross income must not exceed $160,000. And for couples, who file their returns separately,their combined gross income must not be above $100,000.
If you are also contributing towards a traditional IRA then the amount you can contribute towards your Roth IRA will be reduced. If making contributions to both kinds of IRA's then these should not exceed the total amount allowed during any one financial year. Also with the Roth IRA your contributions will be reduced further should your income exceed a defined limit.
However you can use the conversion method to allow you to contribute towards a Roth IRA when you have a traditional one. All you have to do is take out some of the funds from your traditional IRA and then transfer these funds within 60 days into the Roth IRA. Although when you make Roth IRA contributions you are taxed on them. Any withdrawals made or funds distributed are not taxable.
When it comes to making your contributions to your Roth IRA you can do so at any time of year. However, you must make sure you do so before the due date for your tax return in a year not including any extensions offered. As they are not tax deductible then the Roth IRA contributions should not be reported on your tax returns.
As you can see from doing a little investigation just how important Roth IRA's can be to making your retirement a financially stable one. So when planning your retirement you need to consider just how important getting an IRA is to it.
Above we have provided you with details regarding Roth IRA contributions and what things you need to be aware. It is also advisable that you discuss the matter with your financial adviser as they can help to ensure that you select the right one that will ensure that your retirement is a much happier one as well as being a more financially sound investment as well.
First of all, throughout any financial year the amount you contribute to your Roth IRA is limited. Today an individual under the age of 50 can only contribute $4,000. If you are over 50 it is $4,500 or 100% of what your earned income is. Which one it is depends on which is the lesser amount. Also to contribute to IRA's there is no limit on the person's age.
One thing to be aware of when making contributions to a Roth IRA is the restrictions on what your gross taxable earnings can be. An individual must earn less than $110,000 per year. For a married couple who file a joint return the gross income must not exceed $160,000. And for couples, who file their returns separately,their combined gross income must not be above $100,000.
If you are also contributing towards a traditional IRA then the amount you can contribute towards your Roth IRA will be reduced. If making contributions to both kinds of IRA's then these should not exceed the total amount allowed during any one financial year. Also with the Roth IRA your contributions will be reduced further should your income exceed a defined limit.
However you can use the conversion method to allow you to contribute towards a Roth IRA when you have a traditional one. All you have to do is take out some of the funds from your traditional IRA and then transfer these funds within 60 days into the Roth IRA. Although when you make Roth IRA contributions you are taxed on them. Any withdrawals made or funds distributed are not taxable.
When it comes to making your contributions to your Roth IRA you can do so at any time of year. However, you must make sure you do so before the due date for your tax return in a year not including any extensions offered. As they are not tax deductible then the Roth IRA contributions should not be reported on your tax returns.
As you can see from doing a little investigation just how important Roth IRA's can be to making your retirement a financially stable one. So when planning your retirement you need to consider just how important getting an IRA is to it.
Above we have provided you with details regarding Roth IRA contributions and what things you need to be aware. It is also advisable that you discuss the matter with your financial adviser as they can help to ensure that you select the right one that will ensure that your retirement is a much happier one as well as being a more financially sound investment as well.
About the Author:
It is never to early to start saving for your retirement yet? Are you making IRA contributions or in a 401k? For great information on retirement savings plans visit http://www.iracontributionsez.com.
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