Who Can Invest in a Roth IRA

A Roth account is not intended for the super-rich. There are income ceilings that determine who is eligible to use this particular retirement account. For the 2005 tax year, those individuals with a modified adjusted gross income of up to $95,000 are eligible for a full contribution. If a single person's income is between $95,000 and $110,000, a partial contribution can be made. A married couple's limits are $150,000 for full contribution and up to $160,000 for a partial.

How Much You Can Put in Your Roth

The Roth IRA contribution schedule allows for catch-up investing, just like the traditional IRA. Increases for either account will be indexed to inflation after 2009. Contribution levels are identical for traditional IRAs.

Maximum Roth IRA Contributions

Tax Year

Maximum Contribution

Bonus Contribution over Age 50/Total

2005

$4,000

$500/$4,500

2006

$4,000

$1,000/$5,000

2007

$4,000

$1,000/$5,000

2008

$5,000

$1,000/$6,000

2009

$5,000

$1,000/$6,000

Spousal Roth IRA

Assuming you and your spouse fall under the allowable income limits for married joint tax filers, it is possible for one spouse with little or no income to fund a Roth IRA. As long as one person earns at least the maximum contribution level for that particular tax year, the full contribution may be made for each.

Do I have to use funds from my paycheck for my Roth account?

As with the traditional IRA, contributions to a Roth IRA are based on earned income. Dividends, interest income, or capital gains do not qualify for determining how much you can contribute, but the actual cash you put in can come from anywhere — other savings, gifts, etc.

For example, say you earn $75,000 and your spouse earns $3,000 in 2005 when the maximum contribution is $4,000. Because you are filing jointly, your spouse can contribute $4,000, or $1,000 above his earned income, because your joint income will be $78,000. This is under the threshold of $150,000 earned income and certainly within covering the maximum combined contribution of $8,000 ($4,000 each).

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