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Roth IRA Rules

With a Roth IRA, you can take out your contributions without penalty. But there are rules for withdrawing earnings and making contributions.
Oct. 11, 2019
Investing, IRA, Roth IRA
Roth IRA Rules (in Plain English)
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Roth IRA rules at a glance

  • People with modified adjusted gross incomes below $137,000 (single) or $203,000 (married filing jointly) can contribute to a Roth IRA in 2019, though income phase-outs may reduce your maximum contribution. For 2018, those figures were $135,000 (single) or $199,000 (married filing jointly).
  • The maximum contribution for 2019 is $6,000, or $7,000 if you’re age 50 or older. In 2018, the maximum was $5,500, or $6,500 if age 50 or older.
  • Withdrawing investment earnings before age 59½ can trigger taxes and penalties — unless it’s part of a qualified withdrawal.
  • Contributions can be withdrawn tax-free at any time for any reason.

 

Jump ahead to see these rules in detail:

When can you withdraw from your Roth IRA?

With Roth IRA withdrawals, there are two main things to remember:

  • You can withdraw the money you contributed to a Roth at any time and for any reason without paying taxes or penalties. That’s because you already paid taxes on the money you used to fund the account.
  • Different rules apply to taking out investment earnings. This is where things start to get more complicated, because if you’re not careful, you may owe penalties and taxes.

Read on for the rules for withdrawing earnings from your Roth IRA:

If you’ve owned your account five years or more …

You can avoid taxes and the 10% early withdrawal penalty on earnings if two things are true:

  1. The account has been open for five years or more — the clock starts on Jan. 1 of the year you make your first contribution, and
  2. You meet at least one of the following conditions:
  • You’re age 59½ or older
  • You’ve become disabled, or you’ve died and money is being withdrawn by your estate or account beneficiary
  • The withdrawal (up to $10,000 lifetime maximum) is for a first-time home purchase

If you’ve owned your account for less than five years …

Now, if you haven’t had the account for five years, there are a few situations where you can avoid the 10% early withdrawal penalty on earnings, but you’ll still be on the hook for income taxes:

  • You’re age 59½ or older
  • The withdrawal is due to disability
  • The withdrawal is made by a beneficiary or your estate after your death
  • The money is for a first-time home purchase (up to $10,000 lifetime maximum), certain medical expenses or qualified education expenses
  • Due to a financial hardship, you decide to start taking substantially equal periodic payments (aka SEPP, a somewhat complex program described in this IRS FAQ), which requires committing to taking distributions for a certain period of time to avoid paying penalties.

And when you retire …

  • You’re not required to start withdrawing money from your Roth when you retire. (Traditional IRAs, on the other hand, are subject to required minimum distributions (RMDs) when the owner reaches age 70½.)
  • The lack of required withdrawals means those who don’t need to dip into their Roth IRA funds can leave the money in the account and pass all of the dough along to their heirs. (Inherited Roths do generally require beneficiaries to take minimum distributions if the beneficiary is not a spouse of the deceased. See our post on Roth IRA RMDs if this applies to you.)

How much can you contribute to a Roth IRA?

The maximum Roth IRA contribution is $6,000 per year in 2019. It was $5,500 per year in 2018. You can add $1,000 to those amounts if you’re 50 or older. But there are income limits that restrict who can contribute. Those income limits are based on your modified adjusted gross income, or MAGI. If your income falls into the Roth IRA phase-out range, your maximum contribution decreases.

Here are the income limits for Roth IRA eligibility:

Roth IRA income limits for 2019

Filing status2019 modified AGIMaximum contribution
Married filing jointly or qualifying widow(er)Less than $193,000$6,000 ($7,000 if 50 or older)
$193,000 to $202,999Contribution is reduced
$203,000 or moreNot eligible
Single, head of household or married filing separately (if you did not live with spouse during year)Less than $122,000$6,000 ($7,000 if 50 or older)
$122,000 to $136,999Contribution is reduced
$137,000 or moreNot eligible
Married filing separately (if you lived with spouse at any time during year)Less than $10,000Contribution is reduced
$10,000 or moreNot eligible

Roth IRA income limits for 2018

Filing status2018 modified AGIMaximum contribution
Married filing jointly or qualifying widow(er)Less than $189,000$5,500 ($6,500 if 50 or older)
$189,000 to $198,999Contribution is reduced
$199,000 or moreNot eligible
Single, head of household or married filing separately (if you did not live with spouse during year)Less than $120,000$5,500 ($6,500 if 50 or older)
$120,000 to $134,999Contribution is reduced
$135,000 or moreNot eligible
Married filing separately (if you lived with spouse at any time during year)Less than $10,000Contribution is reduced
$10,000 or moreNot eligible

Other rules related to Roth IRA eligibility and contributions:

  • You can contribute to a Roth and a traditional IRA in the same year. Just make sure the combined contribution amount does not exceed $6,000 ($7,000 if 50 or older) in 2019. (For 2018, the limit was $5,500 ($6,500 if 50 or older).
  • You can also contribute to a Roth IRA and a 401(k) in the same year. The IRS is A-OK with you saving money in both an employer-sponsored retirement plan — a 401(k) or 403(b) — and an IRA in the same year, up to the maximum for each type of plan.
  • Roth IRAs don’t have age limits. You’re allowed to make contributions to your Roth IRA past your retirement age. And you can open a Roth IRA for your child, as long as he or she has earned income.
  • There’s a workaround if you’re not eligible for a Roth. It involves rolling money into a Roth, a process that deserves an entirely separate article — like this one on how to set up a backdoor Roth IRA.

Note: There is no minimum required amount for opening a Roth IRA, and no rules about how much money you must put in a Roth IRA. But some brokerages may have their own required minimums.

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What are the tax rules for a Roth IRA?

There are two key things to know about the tax treatment of Roth IRA dollars:

  • Contributions to a Roth IRA are not tax-deductible. This differs from a traditional IRA, where contributions may be deductible from your taxes in the year you make them.
  • But investments in a Roth IRA grow tax-free. That means you owe nothing in taxes on earnings when the money’s in the account — or even when you withdraw it in retirement.

» Read more on how Roth IRA taxes work

To be clear, investors also pay no taxes on earnings growth in a traditional IRA — so long as those funds stay in the account. But unlike a Roth, you will eventually pay taxes on the earnings growth in a traditional IRA when the money is withdrawn.

A previous version of this article misstated how modified adjusted gross income is calculated. This article has been corrected.

A previous version of this article misstated the rules for withdrawing from a Roth IRA without taxes and penalties. This article has been corrected.

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