How Long Can You Contribute to a Roth IRA?

By Bill Herrfeldt

  • Overview

    Considering that people no longer can count on their employers to provide them with an adequate retirement, people must look for ways to do so themselves. Traditional individual retirement accounts, or IRAs, allow you to put away a portion of your income for the future. The Roth IRA is yet another way to save for your retirement. The main difference between the two is that your contribution to a traditional IRA is tax-free, while contributions to a Roth IRA are not. However, you are required to pay income tax on the appreciated value of a traditional IRA when you withdraw it, but accumulated distributions to a Roth IRA are tax-free.
  • History

    Congress passed laws in 1975 that allowed individuals to set up IRA accounts at financial institutions and to deduct their contributions from their taxes. Only employees not covered by corporate pension plans were eligible, and they could contribute up to 15 percent of their pay, or $1,500. To discourage early withdrawals, the government imposed a 10 percent penalty for withdrawals before the person reaches 59 1/2 years old. The Economic Recovery Act of 1981 called for increased contributions and allowed for anyone to set up an IRA. Then the Taxpayer Relief Act of 1997 substantially increased the amount you can contribute to an IRA, and it created the Roth IRA.
  • Benefits

    While contributions to a Roth IRA are taxable in the years that they are made, the government provides that any future withdrawals will not be taxed. That is terrific for the individual who believes that he will be earning far more as he nears retirement than he is earning today. Furthermore, you can make contributions to your Roth IRA in any year in which you earn income, as opposed to passive or investment income. That means that if you continue working after normal retirement age, you can continue making contributions to your Roth IRA. That is an inducement to continue working.


  • Considerations

    You can make contributions of up to $5,000 annually if you are under 49 years of age and $6,000 if you are over that age to your Roth IRA, and those amounts will probably be raised periodically because of inflation. However, there is a cap that will affect your contribution. Currently, if you earn more than $101,000, your eligible contribution is reduced, eventually going to zero as your earned income increases.
  • Size

    Aside from being able to withdraw from a Roth IRA when you reach 59 1/2 years of age, there are no restrictions as to how much money must be withdrawn. Theoretically, no withdrawals are ever required from a Roth IRA, while you can continue making contributions to it if you have earned income.
  • Warning

    You must pay attention to Roth IRA deadlines for making a contribution because once they have passed, you are precluded from taking a deduction for that year. And you are prevented, by law, from "doubling-up" your contribution in the following year.
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