A Roth IRA is an individual retirement account for investors who are looking for tax-free growth potential. Once you reach age 59½, you may qualify for tax-free withdrawals of both Roth IRA contributions and any accumulated earnings. In addition, the Roth IRA owner is never required to take distributions, making a Roth IRA an effective option for both estate and retirement planning purposes.
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Why a Roth IRA Could Make Sense for You
- Roth IRA earnings may be withdrawn free from federal taxes under certain circumstances.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- Up to $10,000 in earnings may be withdrawn tax-free if used for a qualified first-time home purchase.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 IRA Rules at a Glance |
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| Tax Advantages |
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| Eligibility | |
| Age | No age restrictions, but you must have earned income in order to make Roth IRA contributions. |
| Maximum Income | For tax year 2013: May not be eligible if your income is over $127,000 for single filers and $188,000 for joint filers. Roth IRA Contribution Limit Details |
| Minimum Income | Earned income must be equal to or greater than your annual contributions. |
| Maximum Roth IRA Contributions | 2013 - $5,500 per year ($6,500 if you are age 50 or older) Use IRA AutoMax to automatically contribute the maximum amount every year. |
| Minimum Roth IRA Contributions | $1,000 to open an Account. $100 per transaction for any additional contributions which can be set up with our Automatic Asset Builder Service. |
| Withdrawals | |
| Tax-Free | Roth IRA contributions may be withdrawn at any time without taxes or penalties; earnings may be withdrawn tax-free and penalty-free once you reach age 59½ and the account has been open for at least five years.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 mutual 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 | A $20 annual fee is charged for each IRA mutual fund account with a balance of less than $10,000 at the time the fee is assessed. There are no annual fees for mutual fund accounts with balances of at least $10,000; individuals with balances of at least $50,000; or if you qualify for T. Rowe Price Select Client Services. Annual fees will also be waived if the account utilizes all e-delivery options including statements, confirms and prospectuses and shareholder reports. |
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 Roth IRA income limits:
- For married filing jointly—modified adjusted gross income of $188,000 for tax year 2013.
- For single taxpayers—modified adjusted gross income of $127,000 for tax year 2013.
- For married filing separately—$10,000 modified adjusted gross income for tax year 2013.
See the table of Roth IRA rules below for the exact Roth IRA contributions you can make at your adjusted gross income level.
Maximum Roth IRA Contributions for the 2013 Tax Year
Adjusted Gross Income, Investor Under Age 50 |
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| Single | Contribution Limit | Married/Filing Jointly | Contribution Limit |
| $112,000 | $5,500 | $178,000 | $5,500 |
| $113,000 | $5,133 | $179,000 | $4,950 |
| $114,000 | $4,766 | $180,000 | $4,400 |
| $115,000 | $4,399 | $181,000 | $3,850 |
| $116,000 | $4,032 | $182,000 | $3,300 |
| $117,000 | $3,665 | $183,000 | $2,750 |
| $118,000 | $3,298 | $184,000 | $2,200 |
| $119,000 | $2,931 | $185,000 | $1,650 |
| $120,000 | $2,564 | $186,000 | $1,100 |
| $121,000 | $2,197 | $187,000 | $550 |
| $122,000 | $1,830 | $188,000 | $0 |
| $123,000 | $1,463 | ||
| $124,000 | $1,096 | ||
| $125,000 | $729 | ||
| $126,000 | $362 | ||
| $127,000 | $0 | ||
Adjusted Gross Income, Investor Age 50 or Older |
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| Single | Contribution Limit | Married/Filing Jointly | Contribution Limit |
| $112,000 | $6,500 | $178,000 | $6,500 |
| $113,000 | $6,067 | $179,000 | $5,850 |
| $114,000 | $5,634 | $180,000 | $5,200 |
| $115,000 | $5,201 | $181,000 | $4,550 |
| $116,000 | $4,768 | $182,000 | $3,900 |
| $117,000 | $4,335 | $183,000 | $3,250 |
| $118,000 | $3,902 | $184,000 | $2,600 |
| $119,000 | $3,469 | $185,000 | $1,950 |
| $120,000 | $3,036 | $186,000 | $1,300 |
| $121,000 | $2,603 | $187,000 | $650 |
| $122,000 | $2,170 | $188,000 | $0 |
| $123,000 | $1,737 | ||
| $124,000 | $1,304 | ||
| $125,000 | $871 | ||
| $126,000 | $438 | ||
| $127,000 | $0 | ||
**No fees if you subscribe for electronic delivery of statements, confirmations, prospectuses and shareholder reports; if you maintain an individual combined balance of $50,000 or more for all T. Rowe Price accounts; or you qualify for T. Rowe Price Select Client Services based on higher asset levels of $100,000 or more. Otherwise, a $20 fee applies to each fund in an account with a balance of less than $10,000. Depending on your situation, fees may be associated with your underlying investments and a fee could be assessed at the time an account is closed.
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