Roth IRA

If you have an existing Roth IRA account or if you want to open a new Roth IRA account and make a contribution for 2011 then the deadline to make this contribution to a Roth IRA is April 17, 2012. Typically, your Roth IRA contribution deadline for a particular year coincides with the last day you have to file your taxes for that year. In general this day falls on April 15 of every year, however, in 2012 April 15 falls on a Sunday and April 16 happens to be the annual day that the District of Columbia observes the “Emancipation Day” holiday. Hence, for 2012 the last day to make a Roth IRA contribution and be counted for 2011 is Tuesday April 17, 2012.

Now that you know when is the 2011 Roth IRA deadline learn more about:

2011 Roth IRA Contribution Limits

2011 Roth IRA Income Limits

How to Open a Roth IRA

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Your 2011 Roth IRA eligibility is based on you having 1) taxable compensation, 2) your filing status, and 3) the level of your modified adjusted gross income or AGI.

2011 Roth IRA Eligibility if you are married and filing jointly:

If you are married and filing jointly (or you are a qualified widower) and your adjusted gross income, AGI, is less than $169,000 then you are eligible to make a 2011 maximum Roth IRA contribution of $5000. If your AGI is more than $169,000 but less than $179,000 then the amount you can contribute to a Roth IRA is reduced. If your AGI is above $179,000 then you are not eligible to contribute to a Roth IRA for 2011.

If you are married and filing separately and have lived with your spouse then your AGI has to be less than $10,000.

2011 Roth IRA Eligibility if your filing status is Single:

If you are filing as single, head of household and your AGI is less than $107,000 then you are eligible to make a 2011 maximum Roth IRA contribution of $5000. You cannot make a Roth IRA contribution in 2011 if your modified AGI is more than $122,000.

A Roth IRA is a great tax advantaged method to save for retirement. Roth IRA contribution limits change every year based on law and to allow for cost of living adjustments. The 2011 Roth IRA maximum contribution limit is the lower of $5,000 or the amount of your taxable compensation if it is less than $5000 in 2011. This is the same as the 2010 Roth IRA contribution limit.

If you are 50 years or older then you are eligible to make an extra Roth IRA catch up contribution. The deadline to make your 2011 Roth IRA contribution limit is April 17, 2012. You can make the entire maximum $5,000 2011 Roth IRA contribution limit at one time or you can deposit the amount over several occasions up to and until the deadline. The traditional IRA contribution limits for 2011 is also $5,000.

2011 Roth IRA Catch Up Contribution Limits

The IRS has a special provision for Roth IRA account owners who are at least 50 years old or will be 50 by the end of 2011. This 2011 Roth IRA catch up provision allows eligible individuals to make an extra $1,000 contribution as a 2011 Roth IRA catch up contribution for a total of a maximum $6,000 in Roth IRA contributions for 2011. This catch up limit is unchanged from 2010.

Roth IRA Deadline

Every year whenever December rolls by many people find themselves asking: When is the Roth IRA contribution deadline? Or when is the deadline to open a Roth IRA account? Well, you can take a breath and relax because the Roth IRA deadline every year is not December 31 but rather it coincides with the deadline to file your taxes which happens to be April 15 of the following year. So if you you are wondering if you can make a Roth IRA contribution for 2010, then you have until April 18, 2011 to make a Roth IRA contribution for 2010. Even if you do not already have a Roth IRA account, you can still establish a new Roth IRA account and make a 2010 contribution up until April 18, 2011.

The Roth and traditional IRA deadline in 2011 is April 18 instead of April 15 because the IRS has extended the filing deadline for your tax returns because April 15 falls on Emancipation Day, a holiday observed in the District of Columbia and April 16 and 17 fall on a weekend.

Roth IRA Distribution

Roth IRA withdrawals are divided into two main categories: Distributions (qualified and unqualified) and withdrawal of capital. You can withdraw the amounts you put in (your capital) tax and penalty free at any time. Earnings or gains in excess of your principal contributions are subject to distribution rules. Qualified distributions are any amounts withdrawn after having been in your Roth IRA for 5 years and you are at least 59 1/2 years old or you are disabled or buying your first home or made to you as a beneficiary of a deceased Roth IRA owner.

Most other distributions are considered unqualified distributions and you will likely owe a 10% tax penalty. Required minimum distributions (RMD) do not apply to a Roth IRA. However, you can not use distributions from your Roth IRA to satisfy required minimum distributions, RMD, for your traditional IRA.

How to Open a Roth IRA Account?

If you satisfy the Roth IRA eligibility rules, then the next step is to open a self directed Roth IRA account. You can open a Roth IRA at a brokerage firm, a Mutual Fund company, or your local bank. A Roth IRA can be invested in stocks, bonds, or in a Certificate of Deposit (CD). Your investment options depend on where you open your Roth IRA. Opening it at a discount brokerage firm often gives you the most flexibility as most discount brokers allow you to invest your Roth IRA in stocks, bonds, or a money market account if you are really conservative.

Many discount brokers offer no fee Roth IRAs, which means that there are no annual maintenance fees charged. Check with the brokerage firm for their fees. If you start a Roth IRA account at a Mutual Fund company, then you are basically limited to the Mutual Funds offered by that company only.