The Roth IRA is a type of Individual Retirement Account that allows you to receive distributions on a tax-free basis. The Roth IRA does not provide up-front income tax deductions for contributions as with a Traditional IRA. All contributions to a Roth IRA are made on an after-tax basis, but the Roth IRA provides the opportunity for tax-free investment earnings and tax-free distributions if qualified distributions are made.

Unlike other types of IRAs, you are not required to begin taking a distribution at any specific age and you can continue to make contributions as long as you have earned income, even after age 70 1/2. Mandatory distributions are only required to be made after the death of the Roth IRA contractholder.

Am I eligible for a Roth IRA?

Single taxpayers with Adjusted Gross Income (AGI) of $101,000 or less can currently contribute up to $5,000.

• For single taxpayers with an AGI between $101,000 and $116,000, the maximum allowable contribution to a Roth IRA is proportionately reduced.
  
  
• Single taxpayers with AGIs of more than $116,000 may not contribute.
  
  
• Married taxpayers filing joint tax returns with an AGI of $166,000 or less can currently contribute up to $5,000 each per year, even if only one spouse has compensation.
  
  
• For married taxpayers filing joint returns with an AGI between $166,000 and $176,000, the maximum allowable contribution to the Roth IRA is proportionately reduced.
  
  
• Married taxpayers filing joint returns with an AGI of more than $176,000 may not contribute to a Roth IRA.
  
  
• Married taxpayers filing separate tax returns currently cannot contribute to the Roth IRA.
  

How much may I contribute to a Roth IRA?

The maximum contribution is currently the lesser of $5,000 or 100% of your compensation, if you are single, or $5,000 for each spouse or 100% of your combined compensation if you are a married couple filing jointly.

If you are over 50 years old, you can make an additional $1,000 catch-up contribution.

Both maximums apply to an individual's total contributions to all Roth IRAs (except rollovers) and are reduced by any contributions you may have made to any other type of IRAs.

What are the contribution limits?

The annual dollar limit for contributions to a Roth IRA is limited to $5,000 or 100% of compensation, if less. Similarly, rules limiting Roth IRA contributions based on AGI apply.

The annual dollar limitations will increase as follows:

• For years 2002 through 2004 - $3,000
  
• For years 2005 through 2007 - $4,000
  
• For year 2008 - $5,000
  
• For year 2009 and subsequent year - $5,000 indexed for inflation in $500 increments
  

Learn more about Roth Contributions & Withdrawals.

REMINDER: Indexing does not automatically increase the limit each year; increases only apply when the inflation-adjusted limit equals or exceeds the next incremental amount.

Age 50 catch-up contributions

The dollar limits (before any phase-out based on AGI) are further increased by an additional amount for individuals who are age 50 or older at any time during the year (i.e., attain age 50 by December 31). The additional limit for 50-year-olds, or so-called "catch-up contribution" limit, is:

• For years 2002 through 2005 - $500
  
• For year 2006 and subsequent years - $1,000 not indexed for inflation
  

Thus, for example the new IRA contribution limit for 2009 will be:

• $5,000 for individuals under age 50
  
• $6,000 for individuals age 50 or older
  

NOTE: Although the additional limit increase for 50-year-olds is referred to as a "catch-up contribution" limit, it does not require that the individual has contributed less than the maximum limit in prior years as other, traditional catch-up contribution rules do. The full additional age 50 contribution can be made even if maximum contributions have always been made in all prior years, subject to phase-out rules based on AGI.