4 steps to open a Roth IRA in 2018.
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How to Contribute to a Roth IRA
Four Methods:
Roth IRAs (individual retirement accounts) are accounts where withdrawals are tax free while money going into the account has already been taxed. They are ideal for younger, lowincome workers who expect that when they reach retirement age they will be in a higher tax bracket than they currently are. As long as you’re working, you can contribute to a Roth IRA. Fewer limits and restrictions make it easier to contribute to a Roth IRA than to a traditional IRA. Contributions to your IRA are governed by your marital status, how you file your taxes, the other accounts you have, and your income level.
Steps
Deciding When and How to Fund Your IRA

Find the right time to make contributions.Contributions to your Roth IRA on a given year can be made any time during that year. Additionally, you can count contributions made before filing taxes for that year toward your Roth IRA.
 For instance, if you want to make a contribution that counts toward your previous year's contribution limit, you could make it in January, February, March, or early April of the present year (before taxes are due), in addition to making it any time in the previous year.
 You might want to use money earned this year toward last year's Roth IRA contribution limit in order to meet last year's limit before starting toward this year's contributions.

Choose what investments you want to build your IRA with.IRAs allow you to choose from a diverse number of investment options. ETFs, stocks, bonds, index funds, mutual funds, and annuities are just some of the investment options for an IRA.
 Most people fund their IRA through index funds. These are special types of mutual funds which minimize your risk through diversification of investment.
 ETFs are "exchangetraded funds." While they are often seen as a type of index fund, there is at least one important difference. ETFs usually trade commissionfree while index funds can be costly to trade.
 Do not invest in taxexempt mutual bonds. The dividends on these are already taxexempt, so there is little advantage in putting them in an IRA.
 CDs and money markets are also poor choices for IRA investments because they have low interest rates.
 Financial planning is a highly personalized process. Think about your needs and consult a trained financial advisor for help if you’re unsure of what to invest in.

Make regular contributions to your IRA.The more money you put into the account, the faster it will grow. Even if you can’t contribute the maximum possible amount, try to set aside some money each month  say, 0  to deposit into the account. Through the magic of compound interest, your investment will grow rapidly.

Contribute to the IRA online.Online banking is an easy and convenient way to add funds to your IRA. If the bank or broker you opened your IRA through offers online banking, inquire about IRA access online. By making IRA contributions online, you’ll be able to streamline the process of moving funds into the account.
 You can typically set up onetime or recurring payments into your IRA from your bank account.
 You’ll also be able to use your phone, tablet, and laptop to conduct online IRA contributions.

Set up automatic IRA contributions.If you choose to manually add funds to your IRA, you might forget or be inclined to spend the money intended for the IRA on something else. Deliberately skipping one month of payments can lead to another missed month, then another, and so on. By setting up automated contributions to your IRA through your bank or broker, you can remove not only the hassle of arranging contributions each month, but you also remove the possibility that you will skip contributions.
 Talk to your financial institution about the process of setting up automatic payments. They typically need your checking account number, your routing number, and the name of your bank or credit union.
 Do not select to automatically add more than you can afford to your IRA each month.
Determining Contribution Limits Based on How You File Taxes

Analyze your income when you file taxes as a widow, widower, or file jointly.If you are a widow, widower, or you file jointly with your spouse and your modified adjusted gross income (MAGI) exceeds 3,000 but is less than 3,000, your Roth IRA contribution will be reduced by a margin proportional to your earnings. If your MAGI exceeds 3,000, you cannot contribute to a Roth IRA. If your MAGI is below 3,000, you can contribute up to ,500 or your total taxable income, assuming it is less than ,500 for that year.
 For example, if your MAGI is 5,000 in a given year, and you file jointly, you will not be able to contribute to a Roth IRA.
 If your MAGI is ,000 in a given year, and you are a widow, you can contribute the ,500 (,500 if you are 50 or older).
 If your MAGI is 0,000, you file jointly, and you are under 50 years old, your contribution limit will be reduced as follows. You will first subtract 3,000 from your MAGI. In this example, the calculation will equal ,000 (0,000  3,000). You will then divide that number by ,000, which will equal .700. Make sure you round this decimal to at least three places. If the number you get is 1 or more, simply enter "1". Next, multiply your decimal by ,500, which will equal ,850. Next you will subtract ,850 from ,500, which will equal ,650. Make sure you round this number to the nearest . In addition, if the number you get is less than 0, simply enter 0. Assuming you did not contribute to any other IRAs, your reduced contribution limit for the present year would be ,650.
 Keep in mind that limits may change from year to year. Check with the IRS in order to obtain the most uptodate information.

Recognize that your income can impact your contribution limit if you file taxes separately from your spouse.This applies even when you lived together at any point during the year. If you file taxes in this way and your MAGI is zero, you can contribute no more than ,500 or your total taxable income (if it is less than ,500 for that year).
 At this level, individuals 50 or older can contribute a maximum of ,500 to the IRA. If you fall under this tax bracket and earn ,000 or more, you cannot contribute to a Roth IRA.
 If your MAGI falls anywhere between zero and ,000, your maximum contribution will be reduced from ,500 (or ,500, depending on your age) by a margin determined by your MAGI.

Understand that your contribution limit will change even if your MAGI is low.This is true when filing taxes as a single person, as head of household, or as a married person who did not live with your spouse at all during the year. If you filed taxes in this way, you can contribute up to ,500  or ,500 if you’re aged 50 or older  if your MAGI is less than 6,000 per year. If your MAGI surpasses 1,000, you cannot contribute to a Roth IRA. If you’re in the 1,0001,000 zone, your maximum contribution is reduced using a reduction calculation.
Calculating the Reduced Roth IRA Maximum Contribution

Calculate your reduced Roth IRA maximum contribution as a widow, widower, or a married couple filing jointly.If you file taxes as a widow, widower, or a married couple that files taxes jointly, your maximum IRA contribution level will be different than that of someone who files taxes as a single person, head of household, or someone who is married but filing taxes separately from their spouse. To calculate your reduced contribution, subtract your MAGI from 3,000, then divide the difference by ,000. Round the quotient to at least three decimal places. If the quotient is greater than 1, use the number "1" for the next question.
 Multiply the quotient by either ,500 or your taxable compensation for the year, whichever is least. Subtract the product from either ,500 or your taxable compensation for the year, whichever is least. Round the result to the closest . Enter 0 if the result is less than 0.
 Compare the result to the answer of the next calculation. This final calculation is the number you get when you subtract the amount you contributed to other IRAs that year from either ,500 or your taxable compensation for the year, whichever is least. Whichever of these two numbers is least is your Roth IRA reduced contribution limit.
 For instance, if you earn 0,000, subtract 3,000. This yields ,000. Dividing that by ,000 gives you 0.700. Assuming your taxable compensation exceeds ,500 that year, multiply ,500 by 0.700. This yields ,850. Doing the final calculation and assuming you have no other IRAs, you will subtract zero from ,500, yielding ,500. Since ,850 is less than ,500, your maximum allowable IRA contribution for that tax year is ,850.

Determine your Roth IRA maximum contribution when filing taxes separately from the spouse you lived with during the year.If you are a married individual who lived with your spouse at any point during the year but is filing taxes separately, your reduced IRA contribution will be different than that of someone who is a widow, widower, or who is married and filing jointly with their spouse. To figure your reduced Roth IRA maximum contribution, start by dividing your MAGI by ,000. Round the quotient to three decimal places. If the quotient is greater than 1, use the number "1" for the next question.
 Multiply the quotient by either ,500 or your taxable compensation for the year, whichever is least. Subtract the product from either ,500 or your taxable compensation for the year, whichever is least. Round the result to the closest . Enter 0 if the result is less than 0.
 Compare the result to the answer of the next calculation. In this last calculation, you’ll subtract the amount you contributed to other IRAs that year from either ,500 or your taxable compensation for the year, whichever is least. Comparing this number with the other, choose the lower of the two to determine your Roth IRA reduced contribution limit.

Calculate your reduced Roth IRA maximum contribution for all other situations.If you are a single person, head of household, or a married person who is filing separately from your spouse (and have not lived with your spouse during the tax year), your contribution reduction limit will differ from that of a married individual who lived with their spouse at any point during the year but is filing separately, a widow, widower, or a married couple who files jointly. Begin by subtracting your MAGI from 6,000. Then, divide that number by ,000. Round your answer out to three decimal places. If the quotient is above 1, use the number "1" for the next question.
 Multiply the quotient by either ,500 or your taxable compensation for the year, whichever is least. Subtract the product from either ,500 or your taxable compensation for the year, whichever is the least. Round your result to the closest . Enter 0 if the result is below 0.
 Save the number of the above calculation and compare it with the next answer. In this last calculation, you’ll subtract the amount you contributed to other IRAs that year from either ,500 or your taxable compensation for the year, whichever is least. Compare this number with the other, and choose the lower of the two to determine your Roth IRA reduced contribution limit.
Determining Contribution Limits if You Contribute to Other Accounts

Contribute to Roth IRAs exclusively.If you contribute to Roth IRAs and do not contribute to traditional IRAs, you can contribute a maximum of either ,500, or the total taxable earned income you brought home in a given year (assuming that total is less than ,500).If you are 50 years old or older, you can contribute a maximum of ,500 per year.
 For instance, if you earned only ,000 in a year, you can contribute no more than ,000, even if you got a ,000 gift from your rich aunt.

Determine whether to invest in traditional IRAs or Roth IRAs.Roth IRAs and traditional IRAs offer different advantages and disadvantages. Choosing which type of IRA to invest in will depend on your financial circumstances and personal preferences. When you make your choice, think about the following factors:
 Roth IRA contributions are not tax deductible and have limits. However, if your income is low enough that you would not be able to contribute more than the limit anyway, a Roth IRA might work. In addition, if you expect to be in the same or higher tax bracket you are currently in when you retire, a Roth IRA might be the best choice for you because it allows you to pay the tax bill now and get your money taxfree later. However, if you expect to be in a lower tax bracket when you retire, you might want to invest in a traditional IRA so you can push off your tax liability.
 You also need to consider what the rest of your retirement portfolio looks like. In general, your retirement portfolio should be diversified, meaning you should have both taxable and taxfree accounts invested in. Therefore, if you already have a taxdeferred 401(k), you might want to invest in a Roth IRA, which will be taxed up front as opposed to on the back end.
 Also, the Roth IRA offers more flexibility, which may be important to you. Unlike traditional IRAs, you can withdraw your contributions (but not your earnings), penalty free.

Contribute to both Roth IRAs and traditional IRAs.If you have both a regular and a Roth IRA, your maximum contribution limit is different than it would be in the case of someone exclusively contributing to Roth IRAs.When you have both types of IRAs, you can contribute a maximum of either ,500, or the total taxable earned income you brought home in a given year (assuming that total is less than ,500), minus any contribution you made to a regular IRA. If you are 50 or older, you are limited to a maximum contribution of ,500 per year, minus any contribution made to a traditional IRA.
 For instance if you contributed 0 to your regular IRA and you are 42 years old, you can put only ,000, not ,500, towards your Roth IRA. If you are 55 years old and contributed ,000 to your regular IRA, you can contribute just 0 to your Roth IRA in that year.
 Employer contributions to your regular IRA are acceptable and will not lower your Roth IRA contribution limit.

Make qualified reservist contributions.If you are a reservist in the military within two years of ending your active duty period, you can make a contribution using money earned during military service. The money (a qualified reservist distribution) could be from another IRA or from the funds you asked your employer (the military) to deduct from your wages and put toward a retirement plan, including a 401(k) or 403(b).If you make a qualified reservist contribution to your Roth IRA, you can increase your contribution limit in a given year.
 For instance, suppose you are a 30 yearold reservist and earned a qualified reservist distribution in 2014 of ,000, perhaps in the form of an IRA withdrawal. The following year, you could make a maximum contribution of ,500 (,000 + ,500) toward your Roth IRA.
Community Q&A
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QuestionCan I start a Roth IRA after I've retired?wikiHow ContributorCommunity AnswerYes, but you must have "earned" (workrelated) income to use for contributions to your Roth IRA. Other kinds of income (Social Security, pension, etc.) cannot be used.Thanks!

QuestionDoes one have to have earned income to contribute? Can someone older than 70 contribute if income is social security, RMDs, and investments? Thank you.wikiHow ContributorCommunity AnswerRoth IRAs can only be funded through earned income. Investments and other sources of wealth like social security or scholarships cannot be used for Roth IRAs.Thanks!

QuestionWhat is the minimum amount a single person can contribute to open a Roth IRA?wikiHow ContributorCommunity AnswerThe answer depends on your marital status, whether or not you have other IRAs, your income, and whether or not you were/are a reservist in the military.Thanks!
Unanswered Questions

I am selfemployed, but companypaid health care costs are my sole earnings from selfemployment. I take no salary. Can I contribute to a Roth?

Can I use a pension plan payout to fund a Roth IRA?

Can I rollover an existing 401(k) savings plan into a new IRA account after retirement.

What are the limits if I contribute to a 401k Roth Catch Up, and I also want to contribute to a Roth IRA outside the 401K?
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Video
 Contribution limits change regularly. Check the IRS website for most recent contribution limits at .
 Contribute money to a Roth IRA even if you already participate in an employer’s 401(k) plan.
 Make contributions to your account on a regular basis, if possible. You can set up an automatic payment that will allow you to transfer money directly from your bank account to your IRA.
Video: How to Contribute to a Roth IRA even if your over the Income Limit
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Date: 06.12.2018, 17:23 / Views: 34195