Roth IRA Eligibility

You must meet the Roth IRA Eligibility rules in order to set up a Roth IRA account in your name. Basically there are 2 Roth IRA Requirements that you must meet, these are the “earned income” requirement and the income limits.

Earned Income

To qualify for a Roth IRA you must have money coming in. Not only that this income must be classified as “earned income” or money you are exchanging your services for.

Examples of “earned income” include.

• Wages
• Salaries
• Bonuses
• Sales Commission
• Professional Fees
• And so on

If you work for your money and will someday retire and lose that income then you qualify for a Roth IRA. However if you have passive income coming in that doesn’t necessarily have to be worked for, it does not qualify. Some examples of this include.

• Rental Income
• Interest
• Dividends
• Royalties
• And so on

If you have passive income you can still contribute provided you also have “earned income”

Income Limits

In order to meet the Roth IRA Requirements you cannot exceed the Roth IRA Income Limits. These are based on your Modified Adjusted Gross Income and are as follows.

If you file taxes as a single you can contribute as long as your income is below $120,000. If you file taxes as a married couple you can contribute as long as your joint income is below $177,000.

In addition to that the amount which you can invest is lowered if you fall into one of these income levels.

• Single and make between $105,000-$120,000 • Married and combined make between $167,000-$177,000 • Married but file as a single and make less than $10,000 a year

If you fit into one of those categories be sure to talk to a financial advisor to get an idea of where you stand and how much you can contribute.

What Happens if you don’t Meet the Roth IRA Eligibilities?

If you don’t meet the Roth IRA requirements then you simply cannot open up an account.

On the other hand if you already have a Roth IRA opened and you do not meet the requirements right now, due to getting fired, getting a raise, or getting divorced, you may not contribute any more to your plan.

The good news is this does not affect the past. Any money you invested into the plan in the past can stay there and grow; you just cannot contribute any new money. Also if you ever do qualify for a Roth IRA again you can start contributing to your plan once again.

You simply need to meet these Roth IRA eligibility rules in the year that you are investing the money, in order to invest for that year, the past and future do not affect the present. If you do qualify it can really be a good way to save up for retirement and can be worth the effort, so look into it.

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