This a retirement account that allows your money to grow tax-free. Anyone can contribute to a non-deductible traditional IRA, but not everyone can contribute to Roth IRA. Roth IRAs are typically setup and funded for young taxpayers where the growth period is longer and current income is lower. Roth IRA basics:
- For those who qualify, the maximum contribution under age 50 is $5,500 and for individuals over 50 years of age it is $6,500.
- The Roth IRA account must be established by April 15th, but does not have to be funded until you file your return.
- The benefit of the Roth IRA over the non-deductible traditional IRA is that when you start to withdraw the funds all withdrawals are tax-free if withdrawn after five years from the accounts formation.
- There are limits on who qualifies to fund a Roth IRA. The income limits for contributions for a single taxpayer are $137,000 and $193,000 for a joint return. Traditional IRAs can be converted to Roth IRAs, but there are tax consequences.