Roth IRAs are an alternative personal retirement savings account that debuted in 1998. While these accounts offer no immediate tax break since contributions are not deductible, they offer long-term tax savings.
To be eligible to make contributions to a Roth IRA, you must meet two conditions:
Your MAGI in 2011 cannot be more than $107,000 if you are unmarried, or $169,000 if you are married filing jointly. A partial contribution is allowed if your MAGI is between $107,000 and $122,000 if you are unmarried, or $169,000 and $179,000 if you are married filing jointly. No contribution is permitted if your MAGI exceeds $129,000 if you are unmarried, or $179,000 if you are married filing jointly.
Example: You are single, age 40, with MAGI in 2011 of $75,000. You can contribute up to $4,000 to a Roth IRA in 2011. If your MAGI is over $122,000, no contribution is allowed, even if your company doesn’t have any qualified retirement plan. If your MAGI falls within the phase-out range, you can make a partial contribution.
This MAGI limit applies whether or not you participate in another qualified retirement plan.
One important condition that applies to traditional IRAs does not apply to Roth IRAs: There is no age limit for making contributions. If you continue to work past age 70û, you can continue to put money into a Roth IRA (assuming your MAGI is below the limit).
Approximately 51.5 million taxpayers have $3.5 trillion in assets in IRAs (including traditional IRAs, Roth IRAs, SIMPLE IRAs, and SEP IRAs). In 2005, for example, contributions totaled $57.4 billion and rollovers to IRAs were another $231.3 billion.
Source: Joint Committee on TaxationView all factoids