How Long Do I Have to Put Money Into a Roth IRA?
Contributions to your Roth Individual Retirement Account (IRA) are up to you. There are no requirements to make contributions every year, and unlike traditional IRAs, there is no age limit restriction.
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Function
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A Roth IRA is a specific type of individual retirement account. Contributions you make to a Roth IRA are not tax deductible; however, your account grows tax-free. Providing your have earned income (or your spouse does), you may contribute to your Roth IRA
Time Frame
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Once your account is set up, there is no age limit on contributions. You may not make contributions to a traditional IRA after age 70½. That is not the case with a Roth IRA. In fact, you could set up an account at any age. Roth IRA accounts may even be set up for minors provided they have "taxable compensation income."
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Limitations
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You may contribute as little as you'd like or even make no contribution in some tax years. However, there is a maximum contribution limit. For 2010, the maximum amount allowed is $5,000 ($6,000 if you're older than 50). Also, your maximum limit may be restricted depending on your adjusted gross income.
Benefits
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One of the primary benefits of a Roth IRA is tax-free growth. Your contributions are made with money on which you've already paid tax, so when you make withdrawals from your contribution money, it is not taxable. Another benefit of the Roth IRA is that there is no minimum withdrawal required. You may leave the money in your account for as long as you live or leave it to your heirs.
Distributions
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Withdrawals from your Roth IRA are known as distributions. There are certain rules that apply. Rules for Roth IRA distributions are not as strict as those for a traditional IRA. Early withdrawals may be subjected to a 10 percent penalty; however, the penalty applies to earnings, not to the money you've contributed. These rules can be found in IRS Publication 590 (see Resources).
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References
Resources
- Photo Credit Image by Flickr.com, courtesy of Ryan McFarland
