A Roth IRA is a retirement savings plan for investors who are looking for tax-free growth potential. Once you reach age 59½, you may qualify for tax-free withdrawals of both contributions and any accumulated earnings. In addition, you're never required to take distributions, making a Roth IRA an effective option for both retirement and estate planning purposes.
Why a Roth IRA Could Make Sense for You
- Earnings may be withdrawn free from federal taxes under certain circumstances.
- There are no minimum distribution requirements.
- You may potentially reduce or eliminate the taxes your beneficiaries will have to pay after inheriting.
- You may realize tax savings if you think your tax bracket in retirement will be higher than your current rate.
- Up to $10,000 in earnings may be withdrawn tax-free if used for a qualified first-time home purchase.
| Roth IRAs at a Glance | |
| Tax Advantages |
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| Eligibility |
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| Age | No age restrictions, but you must have earned income in order to make contributions. |
| Maximum Income | May not be eligible if your income is over $120,000 for single filers and $177,000 for joint filers in 2010 ($120,000 for single filers and $176,000 for joint filers in 2009). Contribution Limit Details |
| Minimum Income | Earned income must be equal to or greater than your annual contributions. |
| Maximum Contributions | 2009 and 2010—$5,000 ($6,000 if you are age 50 or older) Use Automax to automatically contribute the maximum amount every year. |
| Minimum Contributions | $1,000, or $50 per month with our Automatic Asset Builder Service. |
| Withdrawals | |
| Tax-Free | Contributions may be withdrawn at any time without taxes or penalties; earnings may be withdrawn tax-free and penalty free once you reach age 59½ and the account has been open for at least five years. |
| Taxable | Earnings may be subject to taxes and penalties if distributed before age 59½ and before the account is five years old. |
| Exceptions | Penalties for withdrawals made before age 59½ are waived in the following cases. These exceptions allow tax-free and penalty free distributions upon a five-year holding period:
Rules governing five-year holding period: Five-year holding period begins January 1 of the tax year the Roth IRA was established by contribution. It does not restart when future contributions are made. Unique five-year holding period required applies to Roth IRA assets previously converted from a Traditional IRA. Redemptions of contributions are not subject to the five-year holding period. |
| T. Rowe Price Is Your Low-Cost Roth IRA Solution | |
| No-Load Funds | T. Rowe Price offers no-load funds with no sales charges or commissions. In addition, most of our funds have lower expense ratios than their Lipper averages. |
| Save on IRA Fees | There are no annual fees for mutual fund accounts with balances of at least $5,000; individuals with balances of at least $50,000; or households with balances of at least $100,000 or more invested with T. Rowe Price. A $10 annual fee is charged for each IRA mutual fund account with a balance of less than $5,000 at the time the fee is assessed. |
You may be able to contribute to a Roth IRA for yourself or your spouse if you have earned income. You must also fall below the following income limits:
- For married filing jointly—$177,000 modified adjusted gross income for tax year 2010 ($176,000 for tax year 2009)
- For single taxpayers—$120,000 modified adjusted gross income for tax year 2009 and 2010
- For married filing separately—$10,000 modified adjusted gross income for tax year and 2009 and 2010
See the table below for the exact contribution you can make at your adjusted gross income level.
Maximum Contributions to a Roth IRA for the 2010 Tax Year
| Adjusted Gross Income, Investor Under Age 50 | |||
| Single | Contribution Limit | Married/Filing Jointly | Contribution Limit |
| $105,000 | $5,000 | $167,000 | $5,000 |
| $106,000 | $4,667 | $168,000 | $4,500 |
| $107,000 | $4,333 | $169,000 | $4,000 |
| $108,000 | $4,000 | $170,000 | $3,500 |
| $109,000 | $3,667 | $171,000 | $3,000 |
| $110,000 | $3,333 | $172,000 | $2,500 |
| $111,000 | $3,000 | $173,000 | $2,000 |
| $112,000 | $2,667 | $174,000 | $1,500 |
| $113,000 | $2,333 | $175,000 | $1,000 |
| $114,000 | $2,000 | $176,000 | $500 |
| $115,000 | $1,667 | $177,000 | $0 |
| $116,000 | $1,333 | ||
| $117,000 | $1,000 | ||
| $118,000 | $667 | ||
| $119,000 | $333 | ||
| $120,000 | $0 | ||
| Adjusted Gross Income, Investor Age 50 or Older | |||
| Single | Contribution Limit | Married/Filing Jointly | Contribution Limit |
| $105,000 | $6,000 | $167,000 | $6,000 |
| $106,000 | $5,600 | $168,000 | $5,400 |
| $107,000 | $5,200 | $169,000 | $4,800 |
| $108,000 | $4,800 | $170,000 | $4,200 |
| $109,000 | $4,400 | $171,000 | $3,600 |
| $110,000 | $4,000 | $172,000 | $3,000 |
| $111,000 | $3,600 | $173,000 | $2,400 |
| $112,000 | $3,200 | $174,000 | $1,800 |
| $113,000 | $2,800 | $175,000 | $1,200 |
| $114,000 | $2,400 | $176,000 | $600 |
| $115,000 | $2,000 | $177,000 | $0 |
| $116,000 | $1,600 | ||
| $117,000 | $1,200 | ||
| $118,000 | $800 | ||
| $119,000 | $400 | ||
| $120,000 | $0 | ||
Maximum Contributions to a Roth IRA for the 2009 Tax Year
| Adjusted Gross Income, Investor Under Age 50 | |||
| Single | Contribution Limit | Married/Filing Jointly | Contribution Limit |
| $105,000 | $5,000 | $166,000 | $5,000 |
| $106,000 | $4,667 | $167,000 | $4,500 |
| $107,000 | $4,333 | $168,000 | $4,000 |
| $108,000 | $4,000 | $169,000 | $3,500 |
| $109,000 | $3,667 | $170,000 | $3,000 |
| $110,000 | $3,333 | $171,000 | $2,500 |
| $111,000 | $3,000 | $172,000 | $2,000 |
| $112,000 | $2,667 | $173,000 | $1,500 |
| $113,000 | $2,333 | $174,000 | $1,000 |
| $114,000 | $2,000 | $175,000 | $500 |
| $115,000 | $1,667 | $176,000 | $0 |
| $116,000 | $1,333 | ||
| $117,000 | $1,000 | ||
| $118,000 | $667 | ||
| $119,000 | $333 | ||
| $120,000 | $0 | ||
| Adjusted Gross Income, Investor Age 50 or Older | |||
| Single | Contribution Limit | Married/Filing Jointly | Contribution Limit |
| $105,000 | $6,000 | $166,000 | $6,000 |
| $106,000 | $5,600 | $167,000 | $5,400 |
| $107,000 | $5,200 | $168,000 | $4,800 |
| $108,000 | $4,800 | $169,000 | $4,200 |
| $109,000 | $4,400 | $170,000 | $3,600 |
| $110,000 | $4,000 | $171,000 | $3,000 |
| $111,000 | $3,600 | $172,000 | $2,400 |
| $112,000 | $3,200 | $173,000 | $1,800 |
| $113,000 | $2,800 | $174,000 | $1,200 |
| $114,000 | $2,400 | $175,000 | $600 |
| $115,000 | $2,000 | $176,000 | $0 |
| $116,000 | $1,600 | ||
| $117,000 | $1,200 | ||
| $118,000 | $800 | ||
| $119,000 | $400 | ||
| $120,000 | $0 | ||
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