Roth IRA Rules 2015

Not every investor can take advantage of the Roth IRA; there are income limitations placed upon the investors who wish to contribute funds into this type of account. These limitations are established by the IRS and change on a year to year basis. Currently, a single individual with an adjusted gross income (AGI) of more than $95,000 is prohibited to contribute funds into a Roth IRA account.

For a couple, the AGI is $150,000. These limitations change on a annual basis, so be sure to check with your tax advisor or financial advisor with regards to your eligibility prior to making a contribution. If you are over the age of 50, the IRS has established a catch up provision for those who are eligible to contribute into a Roth IRA.

The catch up provision allows individuals who are 50 or older to make an added contribution into their Roth IRA accounts to help them prepare for their retirement, or in some cases, to catch up in the amount of money that they need set aside to comfortably retire. There are some important Roth IRA rules and facts to become familiar with in addition to the AGI restrictions, including:

  • The person contributing funds into a Roth IRA must have earned income for the tax year that they are making a contribution.
  • The Roth IRA contribution must be made prior to the current year’s tax deadline of April 15th for the prior year’s Roth IRA account.
  • Roth IRA account dividends and distributions are not counted against the total amount allowed to save into the Roth IRA account each year.
  • The Roth IRA contributions can be withdrawn at any time without a penalty. But, if the account earnings are withdrawn prior to the age of 59 ½, they are subject to both an early withdrawal penalty and taxes. There are a few exceptions to this rule which should be evaluated prior to making a withdrawal.

There is a first home purchase provision allowing first time homeowners to withdrawal $10,000 to buy their first home, including both contribution and earnings, without penalty.

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