Vanguard Roth IRA Rules
The financial services firm, Vanguard, offers IRA custodial services to clients. Vanguard must comply with the requirements for Roth IRAs set by the Internal Revenue Service. While the rules are the same for all Roth IRA accounts, regardless of who the custodian is, there are differences with the minimums required to open a new account.
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IRS Maximum Contributions
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In 2011, the IRS annual contribution limit into a Roth IRA is $5,000. IRA owners over the age of 50 are allowed to add $1,000 to the limit, making a $6,000 total limit. Making a full contribution is contingent on how much annual income you have. A single filer must make less than $107,000 with partial contributions allowed, up to $122,000.A married couple filing joint tax returns is allowed full contributions up to $169,000, with partial contributions allowed up to $179,000. No contributions are allowed over the top income thresholds. Roth IRAs are unique in this respect; traditional IRAs allows full contributions but only allow partial deductions.
Starting a Roth
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The IRS does not impose a minimum IRA contribution but does allow custodians to set minimum balances. The minimum to start a new Vanguard Roth IRA is $3,000. This is good news for if you qualify for a Roth but don't have the full $5,000 to make a complete contribution. This is bad news if you don't qualify for a full contribution. If your income allows less than $3,000, you will not be able to open a Vanguard Roth IRA.
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Earned Income Qualification
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It does not matter the amount of your contribution, you must have at least an equal amount in earned income for the year. This means if you have $2,000 in income for the year, you are only able to make a $2,000 contribution. You would not be able to open the Vanguard Roth IRA. Making $50,000 allows you to make the full $5,000 contribution. A married couple can open a Roth for both spouses as long as the couple meets the income requirements and has enough income between them. Income from one spouse qualifies a non-working spouse. The contribution doesn't need to come from the income directly; savings, gifts and investment income are accepted funding sources.
Considerations
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Vanguard Roth IRAs are considered no-load funds. This means there is no sales charge to get into or out of the fund. No commissions are paid for transactions; in addition, there are no distribution, marketing or service fees. Vanguard offers a wide variety of funds in domestic and international investment classes, giving Roth IRA owners the ability to create diversified portfolios with retirement savings.
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