What are the Roth IRA limits for 2007 and 2008? What is a Roth IRA?
A Roth IRA is primarily an individual savings plan that accrues earnings on a tax-free basis and offers no tax-deferral. It is basically a non-deductible IRA. What this means for the individual taxpayer is that all 2007 contribution to your Roth IRA are not deductible on your 2007 income tax for the contribution unlike the traditional IRA. Limits on Roth IRA
The IRS allows any taxpayer (iindividual) "to establish and fund a Roth IRA in the year they have taxable compensation or self-employment income unless their income reaches the level where phase-out occurs."
For the tax year 2007 and 2008, the phaseout occurs at the following income levels for Married Filing Joint and Single Filers as follows:
a. Joint Filers (MFJ) $156,000 ($159,000 for 2008)
b. Single Filers (S) $99,000 ($101,000 for 2008) Main Advantages of Roth IRA's
The main advantage of Roth IRA's are that the withdrawals are tax free if they are made within certain conditions. These are discussed below. There are several advantages of a Roth IRA and these are as follows:
* Contributions can be made after age 70 ½ (unlike the age limitation of a traditional IRA).
* Eligible individuals may contribute up to a specified limit annually.
* Contribution eligibility is not restricted by active participation in an employer’s retirement plan.
* Withdrawals of earnings upon death or disability, for first time home-buying or after age 59 ½ are tax-free provided a 5 year holding period has occurred. What are the Disadvantages of a Roth IRA?
Of course there are some disadvantages of a Roth IRA but there are just a few and these are as follows:
* Premature withdrawals in excess of contributions are fully taxable and are also subject to a 10% penalty.
* Contributions are limited each year for each individual. What are the maximum annual ROTH IRA contribution amounts?
The annual dollar limit for the ROTH IRA contribution are:
* 2007..... $4000
* 2008..... $5000 How to Set Up a Roth IRA?
A Roth IRA must be set up with an institution such as banks, mutual funds, financial companies such as MET Life, Prudential or AXA, credit unions, or brokerages. AGI Limitations For Tax Year 2007 |