Generally, making Roth contributions can be a good choice if you’re in a lower tax bracket now and don’t expect your tax bracket to decrease in retirement. If you have earned income and meet certain income limitations, you can contribute up to $5,500 ($6,500 if age 50 or older) for 2017 and 2018. You still have until April 17, 2018, to make your 2017 tax year contribution.
Benefits of Roth IRAs include:
- Tax-free income
- Contributions can be withdrawn at any time, penalty and tax-free.
- Generally, earnings can be withdrawn penalty and tax-free as long as you’ve held the account at least five years and are age 59½ or older.
- Heirs also receive tax-free distributions.
- Flexibility
- Access to contributions at any time, penalty and tax-free
- No RMDs for the original owner; you never “have” to take money out
- You can continue to contribute at any age (even after age 70) if you have earned income and meet eligibility requirements.
Remember, Roth IRA contributions are not tax-deductible and you must meet the following income limits:
- Single or head of household:
- For 2018, full contribution allowed if modified adjusted gross income (MAGI) is less than $120,000 ($118,000 for 2017)
- Partial contribution allowed if MAGI is $120,000 to $135,000 ($118,000 to $133,000 for 2017).
- Married, filing jointly:
- For 2018, full contribution allowed if MAGI is less than $189,000 ($186,000 for 2017).
- Partial contribution allowed if MAGI is $189,000 to $199,000 ($186,000 to $196,000 for 2017).