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Roth IRAs are individual retirement accounts that are set up like a Traditional IRA, but with some fairly significant differences. Unlike a Traditional IRA, the contributions to Roth IRAs are never tax deductible. However, if certain requirements are satisfied, the distributions from Roth IRAs are tax free. Unlike a Traditional IRA, you are not required to take mandatory distributions, and you can continue to make contributions to a Roth IRA after reaching age 70 1/2.
In 2011, contributions can be made to a Roth IRA as long as your Modified Adjusted Gross Income, or MAGI, is less than:
- $122,000 for those filing taxes as single, head of household, or married filing separately (and you did not live with your spouse)
- $10,000 for married filing separately, and you lived with your spouse
- $179,000 if your filing status was married filing jointly
The contribution limits for a Roth IRA are $5,000 in 2011, or $6,000 with the catch-up contribution that applies to individuals age 50 or older. Our article on Roth IRA Contribution Limits has up-to-date information on contributions as well as deduction phase out thresholds. |