2013 Roth IRA Contribution Limits Based on Filing Status and Income

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After several years the IRS has raised Roth IRA contribution levels, along with the annually indexed income qualification levels that allow eligible contributions. This is good news for those looking for tax effective ways to manage their retirement savings. Unlike 401(k) and Traditional IRA plans, you cannot deduct contributions to a Roth IRA from your taxable income. But this is offset by the fact that gains and distributions are tax-free after you reach the qualified retirement age (59½). This is great for people who think that they will be in a higher taxable income bracket and/or that tax rates will be higher during their retirement years. There are however limitations to contributing to a Roth IRA account based on your filing status, other employer retirement plan contributions and overall income. This is shown in the table below for tax years 2012 and 2013. (Click image to expand)

2013 vs 2012 Roth IRA Contribution and Income Limits

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A Roth IRA also has the following benefits and constraints that you need to be aware of:

  • To avoid penalties and recieve qualified tax free distributions from your Roth IRA account must meet ALL the following conditions:
    • Funds (via contributions) must have been in your account for at least 5-years, and
    • Distributions from the Roth IRA account are made on or after the date you reach age 59½ or made because you become permanently disabled
  • You can also take out up to $10,000 of your contributions to a Roth IRA, without penalty, for a first time home purchase
  • You can leave funds in your Roth IRA account as long as you live.  Unlike traditional IRA and 401(k) plans there is no required minimum distribution.  This makes a Roth IRA a very effective inheritance vehicle because you may potentially reduce or eliminate the taxes your beneficiaries will have to pay after inheriting your estate
  • The retirement account must be designated as a Roth IRA when it is set up. You can open a Roth IRA account online with any of these recommended brokers
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