Roth IRA Summary

The beginning of the year is a good time to contribute to a Roth IRA and to open one if you haven’t taken advantage of this tax-free investment vehicle.


Married: Your Adjusted Gross Income must be under $218,000 (2023), up from $204,000 in 2022.
Single: Your AGI must be under $138,000 (2023), up from $129,000 in 2022.

Actually, the AGI can be slightly higher, but the amount you can contribute is reduced.

You can be any age if you have earned income.

How Much Can I Contribute?

2023:  You can contribute up to $6,500 if you are under age 50, and $7,500 if age 50 or older by the end of 2023.

2022:  You can contribute up to $6,000 if you are under age 50, and $7,000 if age 50 or older.

Regardless of the year, you must have earned-income up to at least the amount you contribute.

You can contribute to a Roth IRA for a spouse who does not have any earned income, if you have earned income.

How Much Can I Contribute if I Contribute to My Company Roth 401(k)?

Contributions to a 401(k) do not affect the eligibility requirement to a Roth IRA.  Thus, you can contribute to both your company 401(k) and the full amount to your Roth IRAs.

You can contribute $22,500 into your 401(k), 403(b) and other such plans for 2023, up from the $20,500 limit in 2022.  Employees 50 and older can contribute an extra $7,500, up from $6,500 in 2022.

Why Have a Roth IRA?

All money in the Roth IRA grows TAX FREE.  You don’t pay any taxes on money (or the growth of this money) in the Roth IRA.

In addition, you pay ZERO taxes when you withdraw the money (provided it is withdrawn by age 59.5 and the account has been open for five years or longer).

Contrast this to a regular IRA or 401(k) plan, where the money grows only tax deferred, not tax free.  When it is withdrawn from a regular IRA. you pay taxes on every penny withdrawn at your ordinary (high) income tax rate.

How About Withdrawals?

Money must be left in the Roth for five years from the beginning of the year the account was established and until age 59.5 (whichever is later).  This is like a regular IRA.

However, unlike a traditional IRA, you do not have to start withdrawing money at age 73Roth IRAs do not require withdrawals until after the death of the owner.  However, beneficiaries of a Roth IRA are subject to the RMD rules.

There are several exceptions that allow you to withdraw the money early: disability, death, or a first-time home purchase.  The first two exceptions are bummers.

The Roth is not a good vehicle for saving for college education since early withdrawals are taxed as ordinary income and you lose the tax-free advantage of the Roth.

When Should I Contribute?

As early as possible in the year to get the maximum benefit of money growing tax-free.

What are the Drawbacks?

It doesn’t get much better. The money grows TAX FREE and there are no mandatory withdrawals starting at age 73.  If you do make withdrawals, you do not pay taxes on the withdrawals, unlike a regular IRA.

Bottom Line

Regardless of your age, be sure to fund a Roth IRA if you qualify.  Do the same for your spouse, even if she has no earned income, provided you do.

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