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IRA Eligibility Q&A |
Who can
establish an IRA?
Anyone who earns money is eligible to establish an IRA. You can
contribute $5,000 to $6,000 of your earnings per year, depending on
your age. However, you cannot contribute more than you earn. For
example, if you earn only $1,500, your contribution is limited to
$1,500. An exception is made for a spouse who doesn’t earn money. If
you are married and one of you doesn’t work, you can contribute up
to an annual total of $12,000 to separate IRA accounts.
Can I establish a Roth IRA, regardless of how much I make?
Roth IRAs were created through the Taxpayer Relief Act of 1997 to
help low- and middle-income people save. The law restricts the
ability of upper-income taxpayers to open these accounts.
Contributions are not tax-deductible, but penalty-free withdrawals
can be taken if the account has been open for at least five years,
you are at least 59.5, or the withdrawal is used to purchase a first
home.
You can contribute $5,000 to $6,000 of your earnings per year,
depending on your age, if you are a single tax-filer with adjusted
gross income of less than $101,000, or joint filers with combined
income of less than $159,000. The maximum contribution phases out
for single filers with adjusted gross income between $101,000 and
$116,000; and for joint filers, the phase-out affects those with
adjusted gross income between $159,000 and $169,000.
Can I invest in both a SEP and a Traditional IRA?
Yes. The money you contribute to the IRA may or may not be
tax-deductible, depending on how much you earn and whether you’re
married or not. But even if you can’t deduct the contribution on
your income tax return, the investments inside the IRA will grow
tax-deferred until you begin making withdrawals. |
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