What Is a Roth IRA?
A Roth IRA is designed to help you save for retirement. It allows after-tax contributions in exchange for the potential for tax-free income in retirement. Generally speaking, if you think you might be in a higher tax bracket when you retire, a Roth IRA may be right for you.
Am I eligible to contribute to a Roth IRA?
If you have earned income, or your spouse has earned income and you file your taxes as Married Filing Jointly, you can contribute at any age as long as your modified adjusted gross income (MAGI) falls below or within the limits below:
How much can I contribute to my Roth IRA?
You can contribute 100% of your compensation – up to the annual contribution limit. Those age 50 and older can make additional catch-up contributions. These limits, however, are reduced by any amount contributed to a traditional IRA.
You can contribute to a Roth IRA anytime during the year and up to your tax-filing deadline (generally April 15). Keep in mind that you must make contributions to your Roth IRA in cash, not with investments.
A Roth IRA Offers Two Kinds of Flexibility
1. How and When Money Is Withdrawn
- You can withdraw your contribution dollars at any time tax and penalty free: You can also withdraw earnings tax and penalty free, as long as you have owned a Roth IRA for at least five years and have reached age 59½. The five-year clock starts with the first contribution.
- No Required Minimum Distributions (RMDs): Unlike a traditional IRA, a Roth IRA has no required minimum distributions (RMDs) when you reach age 70½. You control when you want to withdraw money. If you don't need the money in your Roth IRA for living expenses, you can leave it so that it can continue to potentially grow tax free.
2. Your Investment Options
- With an Edward Jones Roth IRA, you can choose from a wide variety of investments, including stocks, bonds, mutual funds, certificates of deposit (CDs) and money market funds. This variety gives you the opportunity to diversify your savings with an appropriate mix to help meet your retirement objectives.
To learn more about why an Edward Jones IRA may make sense for you, contact your financial advisor today.