Retirement Investing: Charles Schwab: Roth IRAs

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Roth IRA Conversion Roth IRA Guidelines Roth IRA FAQs

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Answers to Roth IRA questions

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Roth IRA

What is a Roth IRA?
A Roth IRA is an Individual Retirement Account that allows you to save and invest for retirement. This type of account could be a more flexible retirement solution than a Traditional IRA, depending on your personal situation and your income.

Why should I consider a Roth IRA?
While there are no immediate tax benefits, here are two important reasons to consider a Roth IRA:

You can contribute to a Roth IRA whatever your age, and you won’t need to take mandatory withdrawals—commonly known as Required Minimum Distributions (RMDs)—after you turn 70½.
Your contributions and earnings grow tax-free and can be withdrawn tax-free.

While a Traditional IRA can offer you tax benefits now, a Roth IRA can give you more control over income taxes when you start taking withdrawals from your retirement account. You can fund a Roth IRA with your own savings or by converting a Traditional IRA or a 401(k) from a previous employer. For more information, try our short video, Roth Conversion Q&A: How Does a Roth IRA Work?

Through 2009, if your annual Modified Adjusted Gross Income (MAGI) was $100,000 or less, you could convert a Traditional IRA to a Roth IRA.

As of January 1, 2010, the IRS removed the income limits for conversion, expanding the eligibility for individuals to convert to a Roth IRA (restrictions may apply in certain states). However, the limitations for contributing after you convert will remain in place.

The ability to contribute to a Roth IRA is based on your Modified Adjusted Gross Income (MAGI):

Single Filers			Married Filing Jointly
2009 Tax Year	2010 Tax Year	Contributions	2009 Tax Year	2010 Tax Year	Contributions
$105,000 and under	$105,000 and under	Maximum annual contribution	$166,000 and under	$167,000 and under	Maximum annual contribution
$105,001- $119,999	$105,001- $119,999	Partial contribution	$166,001- $175,999	$167,001- $176,999	Partial contribution
$120,000 and over	$120,000 and over	Not eligible	$176,000 and over	$177,000 and over	Not eligible

View the Roth IRA and Traditional IRA comparison chart

Need personal assistance? We can help.

Quickly find out if a Roth IRA conversion could be right for you, or take a closer look with our Roth IRA Conversion Calculator. You can also talk to a Schwab investment professional at 866-855-5636.

Important Disclosures

This information is for general informational purposes only and is not intended as an individualized recommendation or to be a substitute for specific individualized tax, legal or investment planning advice. Where specific advice is necessary or appropriate, Schwab recommends consultation with a qualified tax advisor, CPA, financial planner or investment manager.

All expressions of opinion are subject to change without notice in reaction to shifting markets, as well as tax and estate planning rules. Examples provided are for informational purposes only and not intended to be reflective if results you can expect to achieve.

The Schwab Center for Financial Research is a division of Charles Schwab & Co., Inc.

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