Individual Retirement Accounts - Roth IRAs 2021

1 min. readlast update: 04.29.2022

What is a Roth IRA?

A Roth IRA is an individual retirement arrangement. It is a personal savings plan that gives you tax advantages for setting aside money for retirement. An account must be designated as a Roth IRA when opened.

Roth IRA tax advantages and rules compared to a traditional IRA:

  •  Contributions are not deductible. Being covered by an employer retirement plan is irrelevant.
  •  If certain requirements are satisfied for qualified distributions, distributions are tax free.
  •  Can withdraw contributions any time for any reason without owing taxes or penalties.
  •  The required minimum distribution (RMD) rules do not apply. Distributions are not required until death of the participant.
  •  Contributions are not allowed when modified adjusted gross income (MAGI) is above certain limits.
  •  Neither a SEP IRA nor a SIMPLE IRA can be set up as a Roth IRA.

Who Can Contribute to a Roth IRA?

Generally, you can contribute to a Roth IRA if you have taxable compensation and income less than the top of the phaseout range for your filing status, see Roth IRA Phaseouts chart, below.

Individual Retirement Accounts - Roth IRAs 2021

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