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The contribution limit for Roth IRA is the same with your traditional IRA
Qualifying for a Roth IRA is easy. You just need to have some form of compensation in order to qualify for Roth IRA. Unlike your traditional IRA that requires you to be under 70 ½ years of age in order to make contributions, with Roth IRA, there is no age restriction. When it comes to Roth IRA rules, you should not just know about the qualifying rules as the IRA provider will be the one to determine whether you qualify for Roth IRA. You also have to know about the contribution limits as well as the withdrawal rules.
The contribution limit for Roth IRA is the same with your traditional IRA. With Roth IRA, you can make two types of contributions. You have the standard contribution and there is also a catch-up contribution. For standard contributions, the contribution limit is $5000. Catch-up contributions on the other hand are only allowed for those who are 50 years of age and above at the end of the calendar year. The catch-up contribution limit for the year 2010 and for 2011 for your Roth IRA is $1000. Considering the standard contribution and catch-up contribution, you will have a total contribution of $6000. After 2011, these contribution limits are expected to increase based on the inflation.
When it comes to IRA distribution rules for your Roth IRA, there are also two forms. There is the qualified distribution or withdrawal. This is just like your normal withdrawal. You are allowed to withdraw funds five years after you have first started making contributions to your Roth IRA and when you reach the age of 59 1/2 years. If you withdraw funds earlier than that, that will be considered an early withdrawal and it will be subjected to a 10% additional tax penalty. But there are also exemptions to this 10% penalty. You may not be charge a 10% early withdrawal penalty if you are disabled, if you intend to use the withdrawal to purchase your home if you are a first time homebuyer. You may also not be charged this 10% penalty if you make use of the withdrawal to pay for higher education costs.
