If it is less, your taxable compensation for the year. Yes, you can contribute to an IRA for the unemployed non-working spouse with whom you file a joint return, but your combined total contribution cannot exceed your joint taxable income or double the annual limit of the IRA, whichever is less. You can open a Roth IRA through a bank, brokerage, mutual fund, or insurance company, and you can invest your retirement money in stocks, bonds, mutual funds, exchange-traded funds and other approved investments. There are also no mandatory minimum distributions (RMD), so you can leave your Roth IRA to your heirs if you don't need the money.
There has never been an age limit for Roth IRAs, but traditional IRA contributions used to have an age limit of 70½. Converting a taxable retirement account, such as a 401 (k) or traditional IRA, to a Roth IRA has no impact on the contribution limit. Of course, as with other tax-advantaged retirement plans, the Internal Revenue Service (IRS) has specific rules regarding Roth IRAs. Even if your contribution is a small amount, your money will be contributed after taxes and you can receive distributions from a tax-free Roth IRA during retirement.
However, making a conversion is in addition to MAGI and may trigger or increase the phasing out of your Roth IRA contribution amount. The small print of Roth IRA contribution limits is that you cannot contribute more than your taxable compensation for the year. Previously, if you converted another tax-advantaged account (Simplified Employee Pension (SEP) IRA, Employee Savings Incentive Match (SIMPLE) IRA, traditional IRA, 401 (k), or 403 (b) plan) into a Roth IRA and then changed your mind, you could undo the action in the form of a requalification. Contributions that exceed the annual Roth IRA limits can result in an IRS penalty that could easily eliminate any investment income.
Roth IRA contribution limits and eligibility are based on your modified adjusted gross income (MAGI), based on your filing status. Roth IRAs are great for people who want to balance their sources of income, meaning they already have sizable sources of income that will be taxable in retirement, such as a pension, 401 (k) or Social Security, and want to accumulate another pot of money that allows tax-free withdrawals, says Mari Adam , a certified financial planner in Boca Raton, Florida. Contributions to Roth IRAs are not deductible for the year you make them; they consist of money after taxes. If your income is above certain thresholds, you may not be eligible for a Roth IRA or your contributions may be limited.