Roth IRA Qualifications

The biggest qualification for a Roth IRA is income; you need to have a specified maximum income in order to participate. This income doesn’t necessarily need to be partly or entirely from wages, it can include such things as fees, commissions and even rental income and royalty payments.
As of mid-2010, the earnings limits are as follows:

If you file your taxes either singly or as married filing singly, you are allowed to declare earnings of $105,000; if married and filing jointly, the earnings limit for husband and wife combined is $167,000. There are no age limits with a Roth IRA plan, although there are restrictions on the amount that can be contributed in a year.

Roth IRA Withdrawal

It is possible to make a Roth IRA withdrawal, although there are various qualifications that you must meet. There are no penalties and no tax is paid to withdraw, as long as the money has been in the account for at least five years. To withdraw, you also have to be older than 59 and a half; or the money is needed to buy a first home or in case of death or disability. If you don’t meet these requirements, it’s still possible to withdraw your money, although you will have to pay various taxes.
If you meet the Roth IRA qualifications, it makes an excellent retirement plan, with several advantages over other plans. The sooner you open your account, the sooner you can start looking ahead to retirement.

Why? Because it’s a simple, flexible way to invest regularly, with no tax implications. Thats right, any money you make from the Roth IRA is completely tax-free! this aspect of the plan makes it very attractive to investors.

The reason you don’t have to pay tax with a Roth IRA is because the rules state that the only money you can invest in the plan is earnings on which you have already paid taxes. So you can invest money from your wages, bonuses, tips, commissions, etc, but you can’t invest lump sums from non-declared or non-taxed earnings.

By following these rules, you’ve got a great little investment vehicle on your hands. You are safe in the knowledge that when you need to withdraw money from the plan, whether you need it now or whether you take it when you’re retired, you won’t have to pay tax on it. How’s that for peace of mind?

And in terms of flexibility, not only are the plans flexible in terms of when you can withdraw money, but all you have a lot of control over where your savings are invested, especially with a self-directed Roth IRA. You can choose stocks, bonds or even real estate.

One thing you should do if you are considering switching your 401k to a Roth IRA is to talk to a financial advisor. Getting independent financial advice is always a good idea because everyone’s circumstances are different.

Roth IRAs are not ideal for everyone, but millions of savers are certainly making good use of them!