Roth IRA contributions are always made with after-tax dollars. The reward is that you'll pay no taxes on qualified distributions from the Roth IRA - Including all of your earnings.
Who can contribute?
Anyone who has income from compensation (or who is filing jointly with a spouse who earns compensation) with the following MAGI:*
Up to $95,000 (single filers)
Up to $150,000 (jointly filers)
Reduced contributions allowed for higher income (up to $111,000 for single filers and $160,00 for jointly filers)
How much can I contribute?
$3,000 for 2002 through 2004
Higher limit if age 50 or older
Cannot exceed compensation
Reduced contributions that can be made to traditional IRAs
Who can make deductible contributions?
No one can deduct contributions
What are the tax advantages?
Regular contributions can be withdrawn tax – and penalty-free at any time
After the account has been open five tax years, earnings can be withdrawn tax – and penalty –free for any of these reasons: age 59 ˝, disability, death, or a first-time home purchase**
When can I withdraw without restrictions?
Earnings are tax-free if account is open for five tax years and withdrawn for a qualified reason (age 59 ˝ , disability, death, or a first-time home purchase**)
Not required to start withdrawals at age 70 ˝
* MAGI - modified adjusted gross income from the federal tax form
** Lifetime limit for exemption on first-time home purchase is $10,000
*** Formerly known as the Education IRA
