Although there are no income limits for a Traditional IRA, that is not the case for a Roth IRA. How much you can contribute to a Roth IRA depends on how much you earn.
The maximum you can contribute to a Roth IRA is limited to $6,000 per year per person ($7,000 if you’re age 50 or older).
Your contribution can be either reduced or phased-out if your Modified Adjusted Gross Income (MAGI) approaches the upper limits as shown below (2020 income range):
Single – $124,000 – $139,000
Married, filing jointly – $196,000 – $206,000
Married, filing separately – $0 – $10,000
If your income doesn’t qualify, you may still want to open a Roth IRA, because a “backdoor” option could be your solution.
The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax-free, as long as, they are considered qualified.
Limitations and restrictions may apply. Withdrawals before age 59 ½ or before the account has been open for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs.