The minimum qualification for Roth IRA account is that you must have earned income, earn less than a certain amount dependent on your filing status, use an approved institution, and meet specified contribution deadlines. If these minimum qualifications are not met, then the investor will not be able to open a Roth IRA and take advantage of its great benefits.
Earned Income
Earned income includes wages, tips, commissions, and bonuses. Interest, dividends, and social security payments do not qualify. Other examples of income that does not qualify are rental property income and pension income.
Income Limits
The maximum income that can be earned to qualify for a Roth IRA depends on the filing status. If the investor is filing single or head of household, the maximum that can be earned is $120,000. For married filers, the maximum is $176,000. For those that are married filing separately, the maximum amount is $10,000 if they lived with their spouse during the year.
Approved Institution
Institutions that can house Roth IRA’s include banks, brokerage firms, and credit unions. An easy way to find out if the institution you want to use is approved is to simply ask. A good rule of thumb is to use FDIC approved institutions, as they are the most likely to be approved to house Roth IRAs.
Contribution Deadlines
The deadline for most filers for a Roth IRA is April 15th; however, it is a good idea to always get your contributions in early, so you can file early and avoid the mad rush. In addition to the deadlines, filers must keep in mind that the maximum they can contribute is $6000 per year, regardless of previous year contributions. The only exception is filers over 55, who are allowed to contribute an extra $1000 per year as a “catch up” contribution.
Roth IRAs are very efficient vehicles for saving for retirement; if you qualify, open one up today.