A Roth IRA is a variation on a traditional individual retirement account (IRA).
Because contributions are made with after-tax dollars, the Roth IRA allows you to withdraw your earnings completely tax free any time after you reach age 59 1/2, provided your account has been open at least five years.
You may also be able to withdraw money earlier without penalty if you qualify for certain exceptions, such as using up to $10,000 toward the purchase of a first home. And since a Roth IRA has no required withdrawals, you can continue to accumulate tax-free earnings as long as you like.
You can make a nondeductible annual contribution, up to the annual federal limit, any year you have earned income, even after age 70 1/2, though you can never contribute more than you earn. If you are 50 or older, you may also make annual catch-up contributions.
To contribute to a Roth IRA, your modified adjusted gross income (AGI) must be less than the annual limit set by Congress. You can make a full contribution with a modified AGI of up to $95,000 if you're single, and up to $150,000 if you are married and file a joint return.
You may make partial contributions on a sliding scale if your AGI is between $95,00 and $110,000 if you're single, and between $150,000 and $160,000 if you're married and file a joint return. You may also qualify to convert a traditional IRA to a Roth IRA if your modified AGI in the year you convert is less than the cap, currently $100,000, which applies whether you are single or married. The amount you're converting is not included in that total.
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