Happy 20th Anniversary Roth IRA! – Author: Carol Schmidlin
January 1, 2018, marks the 20th Anniversary of the Roth IRA, which was established by the Taxpayer Relief Act of 1997 and named for its chief legislative sponsor, Senator William Roth of Delaware. Investing in a Roth allows you to pay tax on the seed (the smaller, contribution amount) and reap the bounties of the harvest (the contributions plus earnings) tax free!
Hoorays for the Roth IRA:
- Earnings come out tax free as long as five years have passed since you opened your Roth IRA and you are 59½ or older.
- Contributions to a Roth IRA can be withdrawn anytime, for any reason, tax-free and penalty free. In contrast, all withdrawals from a traditional IRA are subject to income tax and generally subject to a 10% early withdrawal penalty if taken before age 59½.
- There is no age limit on making contributions to Roth IRA’s, while one can no longer contribute to a traditional IRA upon reaching the year in which one turns age 70½.
- You can contribute the maximum to a Roth employer plan and the maximum to a Roth IRA, as long as you are under the income limits in the chart below.
- You are not required to take a Required Minimum Distribution (RMD) from a Roth IRA.
Contribution limits for 2018 are $5,500 ($6,500 age 50 or over), however there are income restrictions that may not permit you to contribute to a Roth IRA.
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