Contributions:
Roth contribution limits are the same those for traditional IRAs: $5,500 for the 2015 tax year, or $6,500 if you're 50 or older.
But not everyone can contribute to a Roth, since contributions are limited by income level. In general, you can contribute to a Roth IRA if you have taxable income and your modified adjusted gross income is either:
- less than $193,000 if you are married filing jointly
- less than $131,000 if you are single, head of household, or married filing separately (if you did not live with your spouse at any time during the previous year)
- less than $10,000 if you're married filing separately and you lived with your spouse at any time during the previous year.
Advantages:
Roth IRAs offer a bit more flexibility than traditional IRAs do. You may withdraw your contributions to a Roth IRA penalty-free at any time for any reason (but you'll be penalized for withdrawing any investment earnings before age 59 ½ unless it's for a qualifying reason).
(If you converted money from a traditional IRA into a Roth IRA, you can't take it out penalty-free until at least five years after the conversion.)
Unlike a traditional IRA, Roth IRAs also let you leave your money untouched for as long as you like. And you can keep contributing to a Roth IRA even if you're over age 70 ½.
Disadvantages:
Since the big advantage of a Roth IRA is getting to withdraw the money tax free at retirement, the trade-off is that you have to fund it with after-tax dollars, and won't receive any tax breaks for making contributions.
As with most retirement plans, there are some restrictions on when you can take the money out without incurring a penalty.
CNNMoney (New York) May 29, 2015: 5:12 PM ET
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