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- Earnings may be withdrawn free from federal taxes under certain circumstances.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- Up to $10,000 in earnings may be withdrawn tax-free if used for a qualified first-time home purchase.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 |
|
| Eligibility |
|
| 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 $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—$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| Tax-Free | Contributions may be withdrawn at any time without taxes or penalties; earnings may be withdrawn tax-free and penalty free once you reach age 59½ and the account has been open for at least five years.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—$176,000 modified adjusted gross income for tax year 2009
- For single taxpayers—$120,000 modified adjusted gross income for tax year 2009
- For married filing separately—$10,000 modified adjusted gross income for tax year and 2009
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 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 | ||
Feedback