Roth IRAs have the same contribution limits as traditional IRAs — For 2017, your total contributions to all of your traditional and Roth IRAs cannot be more than:
- $5,500 ($6,500 if you’re age 50 or older), or
- your taxable compensation for the year, if your compensation was less than this dollar limit.
These IRS limits apply to your total contributions, that is all of your traditional and Roth IRAs combined.
When approaching retirement, IRAs are generally helpful to supplement income other than pensions or social security income. traditional IRAs and Roth IRAs have some similarities. Though, unlike traditional IRAs, you cannot deduct contributions to Roth IRA. This means that no matter how much you contribute to a Roth IRA, you cannot deduct this amount on your tax returns. If you make excess contributions, all money in excess will be subject to a 6% tax per year as long as the excess amounts remain in the IRA.
You can make withdrawals from a Roth IRA at any time. For Roth IRAs, withdrawals and distributions are not taxable if it’s a qualified distribution (or a withdrawal that is a qualified distribution). Otherwise, part of the distribution or withdrawal may be taxable. If you are under age 59 ½, you may also have to pay an additional 10% tax for early withdrawals unless you qualify for an exception.
Leaving Rollovers aside, the main difference between Roth IRAs and traditional IRAs is that contributions to traditional IRAs are deductible while Roth IRA contributions are not.
Roth IRA accounts can be opened at most banks and financial institutions.