How Old Do You Have to Be to Open a Roth IRA?
Unlike traditional IRAs, there is no age requirement for opening a Roth IRA. Earned income is the requirement when establishing Roth IRA accounts. Under the tax-deferred growth structure and tax-free distributions of a Roth IRA, the younger investors start contributions, the more time the money has to increase.
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Minor Roth IRAs
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Because minor children often don't make enough to benefit from a tax-deduction, establishing a Roth IRA is much more attractive. Even an infant who models for a local clothing store can have a Roth IRA. The money contributed doesn't need to come from the earnings. In fact, anyone can make the initial contribution as long as the contribution doesn't exceed what the child earned. Keep in mind that Roth IRAs do not work like custodial accounts for minors. Once the money is in the IRA, the child has the right to do with it as he desires.
Benefits
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There is more than just the benefit of growth when opening a Roth IRA for a minor. It is a viable means of creating a financial foundation for the child. The money can be used without penalty for college tuition expenses or to use as a down payment for a first home. Up to $10,000 is accessible for the purchase, remodel or building of a first home. As long as the Roth IRA is owned for at least five years, the IRS waives any early withdrawal penalties when the money is used for these purposes.
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Income Limitations
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Rather than age, Roth IRA contributors need to qualify based on income. A person filing taxes as a single person must make less than $105,000 in gross income to make the full $5,000 contribution based on 2010 IRS regulations. Partial contributions can be made between $105,000 and $120,000 in gross income. Married couples filing joint returns must make less than $167,000 for a full contribution and no more than $177,000 for a partial. Those over the age of 50 can add $1,000 to the maximum limit as a catch-up contribution.
Senior Establishment
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Roth IRAs don't have an annual Required Minimum Distribution mandated by the IRS starting at age 70 1/2. Traditional IRAs are pre-tax dollars and the IRS starts to claim its portion at this age threshold. Roth IRAs are established with after-tax dollars, therefore the RMD is of no use to the IRS and not applicable to the Roth. This means those over the age of 70 1/2 can establish and contribute to a Roth IRA as long as they still have earned income.
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