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What is the Roth IRA age limit?
Does the IRS impose mandatory distributions at a certain age? And what's the minimum age for
withdrawals?
These are all legitimate questions, and you need to know the answers.
Why?
Because if you open or fund an account when you don't meet the basic eligibility requirements,
then you can trigger taxes, excess contribution penalties, and other federal sanctions you don't
want to deal with. So take your time and learn the Roth rules. Adhere to the IRS guidelines, and
you set yourself up for a smooth and enjoyable experience.
Is There a Minimum or Maximum Age Requirement?
No. The IRS does NOT impose an age limit on who can or can't open a Roth account. However,
the IRS does demand every account holder meet one particular requirement, regardless of age.
You must generate earned income. That's right. To fund a Roth, you must have taxable earned
income for the year in which you wish to make your contribution. As long as you have earned
income, it doesn't matter if you're 5 years old, 45 years old, or 105 years old... You meet the basic
requirement for funding an account. Need an example? Let's say your 5 month old baby lands a
blockbuster deal as the next Gerber baby. After a big photo shoot, your baby gets a check for
$100,000. Can your baby open and fund a Roth?
The answer is...
Yes.
It goes without saying you have to fill out the paperwork. But as long as your baby has
documented taxable earned income, your baby is eligible to open and fund an account (subject to
the usual income limits, of course). Obviously, this is an extreme example, but it vividly illustrates
that no one is barred from making a Roth contribution. Now, let's put your baby in a different
situation... What if your baby receives a $5,000 check (a gift) from grandma? Can your baby open
an account with that money?
No.
Why?
Because a gift is not earned income.
And earned income is the key to eligibility. So remember, the age of the account holder isn't really
relevant. What really matters is earned income.
No Required Age Limit for Withdrawals
Unlike a Traditional IRA, which requires you to take annual distributions after age 70 , a Roth IRA
does not force you to withdraw funds once you reach a certain age. In fact, you can continue to
contribute to your Roth long after age 70 if you wish.
This gives you a huge flexibility advantage.
If you're forced to withdraw funds when you don't need them, it puts you at a disadvantage. For
one thing, you now have to find a new place to invest your money, one that probably lacks the tax-
free growth offered by an IRA. On top of that, what if you're invested in stocks or bonds and the
market for either one takes a nosedive right at the very moment you're required to withdraw
money? No matter how you look at it, forced distributions are a disadvantage. Fortunately, your
Roth IRA doesn't put you at such a decided disadvantage.
Is There a Minimum Age for Taking Distributions?
Yes.
In fact, age 59.5 is the only age you need to remember when it comes to your Roth IRA. That's the
age you must reach before you can withdraw investment gains tax-free and penalty-free. You can
certainly withdraw funds prior to age 59 , but if you withdraw investment gains, those gains are
subject to income taxes and a 10% Roth IRA early withdrawal penalty.
However...
You can always withdraw your original contribution amounts tax-free and penalty-free. It's only the
investment gains on those original contributions that are subject to taxes and penalties if you
withdraw them prior to age 59 .
Conclusion
You don't have to worry about a Roth IRA age limit in regard to your eligibility to open or fund a
Roth IRA. Earned income, not age, is the key factor for determining basic Roth IRA eligibility.
You also don't have to concern yourself with forced withdrawals or required distributions once you
reach a certain age. Unlike a Traditional IRA, which requires annual distributions after age 70 , you
don't have to worry about mandatory withdrawals at an arbitrary age with a Roth IRA.
The only age you need to remember is age 59 . That's the age when (assuming your account
meets the 5 year rule) you can withdraw funds tax free and penalty free.
For more information on the Roth IRA age limit, visit Britt's website, Your Roth IRA, a site focused
exclusively on helping people with self-directed Roth IRAs.
Article Source:
http://EzineArticles.com/?expert=Britt_Gillette
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