Open and Shut Cases for Roth IRA Qualifications and Withdrawals

The Roth IRA qualifications are as follows: only singles(or those who file as “head of household”) with annual incomes of $120,000 or less, or couples filing jointly with a combined total income up to $177,000  are deemed qualified to open a Roth IRA. In addition, singles can only make a fully “allowable” contribution ($5,000 for those under 50 years old or $6,000 for those older) if they bring in less than $105,000. However, should  their adjusted gross earnings be between $105K and $120K, they can make a “ partial” contribution to their accounts for the year.

The rules for married people who live together but file separately state that only the individual with an adjusted gross income of $0 is allowed to make a full contribution, while their partner claiming income of $0-$10,000 is allowed to put in less. In addition, it is important to realize that only “earned” money can be deposited into a retirement account. Money obtained solely from interest payments or stock dividends cannot be used.

In addition, no one may put more money into their Roth IRA  than they actually make. Thus, if the total income claimed for the year is $4,000,  that is the most that can be contributed at that time.

Another thing to remember is that unlike money put into traditional IRAs, funds added to Roths cannot be used as a deduction to lower their taxable income.

Anyone can withdraw funds from their Roth IRA, without penalty once  they have reached the age of  591/2. However, those who have been making “qualified” contributions for at least five years after opening their account  can also make a Roth IRA withdrawal earlier without being penalized if  they need money  to cover medical bills, are purchasing a home for the first time, pay for education or are disabled.  Money can also be withdrawn “tax-free” if it is being rolled over into another type of IRA.

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