Are you eligible to participate in a Roth IRA?

Your ability to own and contribute to a Roth is, in most cases, dependent on the following variables…

- Account Held By Approved Institution 
- Your Modified Adjusted Gross Income (MAGI) 
- Your Age 
- Your Ability to Meet Income Limits 
- Your Ability to Meet the Contribution Deadline

Let’s discuss each requirement…

Hosted By An Approved Institution

You need to host your account with an IRS-approved financial institution.

Generally speaking, these institutions include banks, credit unions, brokerage firms, savings & loans, and other FDIC-insured financial institutions.

Your Modified Adjusted Gross Income (MAGI)

To qualify as “earned income” in the eyes of the IRS, Roth IRA contributions must come from income generated by wages, salaries, professional fees, and other such income received for services provided.

The following sources of income are most likely eligible for investment…

- Wages 
- Salaries 
- Insurance Premiums 
- Tips 
- Bonuses 
- Job-Related Profit Sharing 
- Sales Commissions

Unfortunately, the following income sources are most likely NOT eligible for investment…

- Interest 
- Rental Property Income 
- Disability Payments 
- Social Security Payments 
- Pension Income 
- Annuity Income 
- Dividends 
- Capital Gains

Your Age

Currently, there are no age limits on a Roth IRA.

All you need is earned income.

So if you’re 10 years old and have a part-time job cutting grass, then you can invest the money you earn in a Roth.

Likewise, if you’re 100 years old, and you have a part-time job working as the Wal-Mart greeter, then you can invest the money you earn as well.

Your Ability to Meet Income Limits

Unfortunately, Roth IRA eligibility is only available for people in certain income ranges.

Generally speaking, it’s determined by the following rules, which denote the maximum income you can earn in a taxable year and still remain eligible to make a Roth IRA contribution:

- $169,000 for married individuals who file a joint tax return. 
- $10,000 for married individuals who file a separate tax return and lived with their spouse at any time during the course of the tax year. 
- $116,000 for individuals who file as single, head of household, or married filing separately and did not live with their spouse at any time during the course of the tax year.

Your Ability to Meet the Contribution Deadline

While you can contribute anywhere between $5,000 and $6,000 per year depending on your income and age, you can’t ever contribute more than the maximum in any given year just because you didn’t contribute the maximum the year before.

If you’re willing and able to make the maximum contribution, be sure you do so before the April 15 tax deadline.

That’s the deadline for contributing.

For example, if you want to make a Roth IRA contribution for the Year 2009, you have until April 15, 2010 to do so.

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