I was told that I could contribute up to $4000 per year to my Roth IRA. Does it mean I can only put $4000 in the Roth IRA account per year? What if I put more?
Shannon
IRA Contribution?
I was told that I could contribute up to $4000 per year to my Roth IRA. Does it mean I can only put $4000 in the Roth IRA account per year? What if I put more?
Shannon
{ 3 comments… read them below or add one }
Raul
Whoever manages the IRA should know you cannot exceed the limit and if you DO exceed the limit, you will have a paperwork nightmare. By the way, the limit changes from year to year and your figure is wrong. Please visit:
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Minnie
For 2007 thats all you can put in. Starting in 2008 you can put in 5000 dollars. And if you’re over 50 you can put in an extra 1000. You have until April 15th of the following year, or the deadline to file you income taxes, to complete your contributions.
Nellie
Great question! I have attached from my website an answer I hope clears things up for you. Any more questions you can email me at Check out our website for many more options for retirement etc. at Thanks-Scot A. Carl-Principal
Concord Financial Services Here’s your answer.
What Is a Roth IRA?
Roth IRAs are tax-favored financial vehicles that enable investors to save money for retirement. They differ from traditional IRAs in that taxpayers cannot deduct contributions made to a Roth. However, qualified Roth IRA distributions in retirement are free of federal income tax and aren’t included in a taxpayer’s gross income. That can be advantageous, especially if the account owner is in a higher tax bracket in retirement or taxes are higher in the future.
A Roth IRA is subject to the same contribution limits as a traditional IRA ($4,000 in 2007 and $5,000 in 2008). Special “catch-up” contributions enable those nearing retirement (age 50 and older) to save at an accelerated rate by contributing $1,000 more than the regular annual limits.
Another way in which Roth IRAs can be advantageous is that investors can contribute to a Roth after age 70½ as long as they have earned income, and they don’t have to begin taking mandatory distributions due to age, as they do with traditional IRAs.
Roth IRA withdrawals of contributions (not earnings) can be made at any time and for any reason; they are tax-free and not subject to the 10% federal income tax penalty for early withdrawals. After a minimum five-year holding period but before age 59½, tax-free and penalty-free withdrawals of earnings can be made due to a qualifying event, such as death or disability or to purchase a first home (up to a $10,000 lifetime cap).
Although college expenses are not a qualifying event, Roth IRA account owners can withdraw earnings penalty-free for qualifying higher-education expenses (for the account owner, a spouse, a child, or a grandchild). However, these withdrawals would be subject to ordinary income tax.
To qualify for a tax-free and penalty-free withdrawal of earnings in retirement (after age 59½), a Roth IRA must have been in place for at least five tax years.
Keep in mind that even though qualified Roth IRA distributions are free of federal income tax, they may be subject to state and/or local income taxes. Eligibility to contribute to a Roth IRA phases out for taxpayers with higher incomes.
If you’re looking for a retirement savings vehicle with some distinct tax advantages, the Roth IRA could be appropriate for you.
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