Roth IRA rules sound great and are the benefits that come with them. Here are 9 important ones that everyone must know about in 2020. To begin with:
1. Maximum Contribution Limit
The contribution to Roth IRA has a maximum contribution limit. Currently, it is $6,000 for those who are below 50 years. However, one thing to be taken care of is that when you have Roth IRA and Traditional IRA, the contribution amount must be Dollar 6,000 in total. Each year the Internal Revenue Service (IRS) will review the total does not exceed the prescribed limit. It will be adjusted accordingly and kept under the maximum contribution limit.
2. Catch-up Contribution Limit
Once you cross 50 years of age, you can make a catch-up contribution. It will help you grow your retirement savings. The additional amount allowed is Dollar 1,000. The total catch-up contribution limit is Dollar 7,000.
3. Employer-Restriction Plans
You are allowed to have both a Roth IRA and an employer-sponsored retirement plan. For example, if you have 401(k) or another employer-sponsored plan, your contribution can be up to Dollar 19,500 per year. The condition required is you must be less than 50 years.
4. Maximum Income Limits
| Tax Filing Status | Income Level | Maximum Contribution |
| Single (Head of the house or married couple filing independently) | Below Dollar 124,000 Dollar 124,000 to Dollar 138,999 Dollar 137,000 or more | Dollar 6,000 to Dollar 7,000 (50 years and above) Reduced Contribution No Contribution |
| Married Filing Jointly or a widow(er) | Below Dollar 196,000 Dollar 196,000 to Dollar 205,999 Over Dollar 206,000 | Dollar 6,000 per individual or Dollar 7,000 (50 years or older) Reduced Contribution No Contribution |
| Married Filing Separately (at some point in the year, lived with a spouse | Under Dollar1,000 Dollar 10,000 or more | Reduced Contribution No Contribution |
5. No Required Minimum Distribution (No RMD)
If you do not want to make a withdrawal from your Roth IRA, the choice is in your hands. Therefore, when you leave your Roth IRA savings to someone other than your spouse that person must take distributions at some point in time.
6. Tax-free For Your Beneficiaries
The money passed on to beneficiaries can be accessed Tax-free.
7. Get Around Income Limits with a Backdoor IRA
There is a way around income limits with backdoor IRA. If you have too much money, open a traditional IRA. Therefore, turn around and convert it to a Roth IRA.
8. No Age Limit
Roth IRA does not have any age limit. You can continue putting money into your account as long as you are earning income, which qualifies for investment.
9. Fund Roth IRA on behalf of Spouse
· The working couple has eligibility for IRA contributions on the following conditions:
· Jointly fund in Roth IRA with their spouse on their income-taxes
Having eligible income, including salaries, commissions, which covers their IRA contribution and the total amount of their joint IRA contribution
The contributions can be accessed at any time. The money in the ROTH IRA is already taxed. The money is yours anytime you need it. However, you cannot make withdrawals until 59 years 6 months.
