Roth IRA contributions, unlike those in a traditional IRA, don’t provide you with a deduction at tax time. Therefore, there’s no hurry to invest in your Roth IRA before the tax deadline; you are free to open a Roth and start investing whenever you want, if you qualify. However, each tax year there is a maximum amount you may contribute to a Roth, so if you want to make a contribution for last year, make sure to do it before April 15th.
Contributing After Tax Time
If you do open a Roth IRA after filing your taxes, you’ll be making contributions for the current tax year. For example, if you filed your 2010 taxes in April of 2011 and opened a Roth in May 2011, your Roth contribution will count towards the 2011 tax year. As of the time of publication, there is a cap on how much you may contribute to a Roth. If you are under 50 years old, you may contribute up to $5,000 to a Roth IRA as of the time of publication (given that your income was at least $5,000). If you are over 50, you may contribute $6,000.
Roth IRA Qualifications
Before you can open a Roth IRA, you must meet certain work and income guidelines. First, you must earn income from work -- meaning if your only source of income is from things like gifts, government benefits or pensions, you cannot invest in a Roth. Also, as of the time of publication, to invest in a Roth your income must be under $122,000 if you are single, or $179,000 or less if you are married filing jointly or as head of household.
Unlike a traditional IRA, you may still contribute to a Roth after you reach 70 years old. You may also withdraw your contributions (not your returns, however) from your Roth at any age without paying a penalty fee. Inversely, you don’t have to start making withdrawals at a certain age. Instead, you can leave the money untouched as long as you’d like. You needn’t worry about paying taxes on money you withdraw from your Roth in retirement, either: because you funded your Roth with after-tax dollars, you won’t be taxed on the money a second time.
Where to Invest
If you’re ready to contribute to a Roth IRA, there are different ways to go about it. You may open one at your bank, a brokerage or a mutual fund company. If you don’t have much experience investing, Cameron Huddleston of Kiplinger recommends opting for a mutual fund, which will invest your money for you into a variety of stocks. If you’re more experienced, you may hand-pick stocks yourself by opening a Roth IRA through a brokerage.
- CNN Money: Ultimate Guide to Retirement: What Are the Advantages of the Roth Version?
- CNN Money; Where Should I Open an IRA?; Walter Updegrave; March 2004
- IRS.gov; Publication 590 -- Individual Retirement Arrangements
- "Kiplinger"; Open Your First IRA; Cameron Huddleston; February 2007
- IRS.gov; 2011 IRA Contribution and Deduction Limits; November 2010
- IRS. "Traditional and Roth IRAs." Accessed March 26, 2020.
- EBRI. "Issue Brief: August 13, 3018; No. 456." Page 8. Accessed March 26, 2020.
- IRS.gov. "Income ranges for determining IRA eligibility change for 2021." Accessed Nov. 01, 2020.
Low began writing professionally in 2005. She writes primarily about parenting, personal finance, health, beauty and fashion. Low holds a Bachelor of Arts in writing.