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Roth IRA Eligibility

Do you meet the Roth IRA eligibility requirements?

Your ability to open, and contribute to, a Roth IRA is generally dependent on the following factors...

  • Approved Institution
  • Earned Income
  • Age
  • Income Limits
  • Contribution Deadline

Let's address each of these requirements...

An Approved Institution

Your Roth IRA must be opened and reside with an IRS-approved institution.

As a general rule, such institutions include banks, brokerage firms, credit unions, savings & loan associations, and other FDIC-insured financial institutions.

The easiest way to open a Roth IRA is to do it online.

Read Best Online Discount Brokerage Firms to find the best online broker for your Roth IRA.

Earned Income

To qualify as "earned income" for the purposes of investing in a Roth IRA, income is generally defined as wages, salaries, professional fees, and other income received for services rendered.

As a result, the following sources of income are usually eligible for investment in a Roth IRA...

  • Wages
  • Salaries
  • Job-Related Profit Sharing
  • Sales Commissions
  • Insurance Premiums
  • Tips
  • Bonuses

Unfortunately, the following sources of income are generally NOT eligible for investment in a Roth IRA...

  • Interest
  • Dividends
  • Capital Gains
  • Rental Property Income
  • Disability Payments
  • Social Security Payments
  • Pension Income
  • Annuity Income

Try to think of it this way...

If you "do nothing" and still earn the money, then it's not eligible for a Roth IRA.

But if you earned the money because you provided labor, brain power, or some skill which took time and effort during the course of the tax year in question, then it's probably eligible as a contribution for your Roth IRA.


No age limits currently exist in regard to Roth IRA eligibility.

All you need is earned income.

So if you're ten years old, and you have a summer job cutting grass for your neighbors, you can invest those earnings in a Roth IRA.

Likewise, if you're ninety-nine years old, and you have a part-time job working at McDonald's, you can also invest your earnings in a Roth IRA...

Income Limits

Unfortunately, Roth IRA eligibility is only available for people in a certain income range.

Your "income" according to the IRS only includes the types of compensation listed above...

Officially, it's called your Modified Adjusted Gross Income (MAGI)...

What's Modified Adjusted Gross Income, you ask?

Good question.

It's an IRS term for defining your eligible income, and it should be located on your IRS Form 1040, the one you use for filing your taxes...

If you have trouble finding this number and you're unsure if you qualify based on your income, make sure to consult with an accountant before opening a Roth IRA.

In general, your Roth IRA eligibility is determined by the following rules, which indicate the maximum income you can earn in a taxable year and still retain your Roth IRA eligibility...

  • $179,000 for married individuals who file a joint tax return.
  • $10,000 for married individuals who file a separate tax return and lived with their spouse at any time during the course of the tax year.
  • $122,000 for individuals who file as:
  • o Single
  • o Head of household
  • o Married filing separately and did not live with their spouse at any time during the course of the tax year.

Read Roth IRA Income Limits for more detailed information.

Contribution Deadline

While you can contribute to your Roth IRA anywhere between $5,000 and $6,000 per year depending on your age and income, you can't contribute more in one year just because you didn't max out your contribution the year before.

For instance, let's say you're eligible to invest $5,000 per year in your Roth IRA...

You can't contribute $2,000 in Year 1 and follow that up with an $8,000 contribution in Year 2.

If you only contribute $2,000 in Year 1, the most you can contribute in Year 2 in the maximum, which in this case is $5,000.

So if you're capable of making the maximum contribution, make sure you do so before the deadline. Which, of course, begs the question...

When's the deadline?

The Roth IRA deadline for making a contribution is the same as the account holder's tax-filing deadline.

In most cases, this is April 15th of the calendar year after you earned your income.

For example, if you want to make a Roth IRA contribution for the Year 2009, you have until April 15, 2010 to do so.

Also keep in mind that if you receive an extension of your tax-filing deadline, this does NOT extend the time period during which you can make a contribution to your Roth IRA.

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