Eligibility for Roth IRA
Roth IRA is an
Individual Retirement Account allowed by the US Taxpayer Relief Act of 1997. It
enables individuals to save a limited amount, without any tax reduction, for
their retirement.
It would be wise for an individual to think seriously about life after retirement, as early as possible. Enticing as it is, do you desire to join Roth IRA? Well, to establish a Roth IRA account in your name you need to fulfill certain eligibility rules. Of all these, the ‘income limits’ and the ‘earned income’ are the prime requirements to be met with.
One should have earned income. That is, he should be receiving money by offering service. Now, what all kinds of income come under the ‘earned income’? Well, salaries, bonus, professional fees, wages etcetera are a few. In short, an individual who is presently working to earn money but shall not be earning so in future, due to retirement, shall be eligible for joining Roth IRA.
There is yet another kind of income named ‘passive income’ which is earned by individuals. In short, this is a kind of income for which the individual shall not be offering any services. For instance, income from rents, interest, Dividends, Royalties and so on comes under this type. Individuals depending solely on passive income are not eligible for joining the Roth IRA. However, those having earned income too apart from passive income are eligible to establish the Roth IRA Account in their name.
The noteworthy advantage with Roth IRA is that an individual, who already has a Roth Account, but is not eligible for opening a second due to reasons such as loss of employment or a divorce need not worry about the past account as these conditions do not affect that. Wonderful, isn’t it, so give it a try.
It would be wise for an individual to think seriously about life after retirement, as early as possible. Enticing as it is, do you desire to join Roth IRA? Well, to establish a Roth IRA account in your name you need to fulfill certain eligibility rules. Of all these, the ‘income limits’ and the ‘earned income’ are the prime requirements to be met with.
One should have earned income. That is, he should be receiving money by offering service. Now, what all kinds of income come under the ‘earned income’? Well, salaries, bonus, professional fees, wages etcetera are a few. In short, an individual who is presently working to earn money but shall not be earning so in future, due to retirement, shall be eligible for joining Roth IRA.
There is yet another kind of income named ‘passive income’ which is earned by individuals. In short, this is a kind of income for which the individual shall not be offering any services. For instance, income from rents, interest, Dividends, Royalties and so on comes under this type. Individuals depending solely on passive income are not eligible for joining the Roth IRA. However, those having earned income too apart from passive income are eligible to establish the Roth IRA Account in their name.
The noteworthy advantage with Roth IRA is that an individual, who already has a Roth Account, but is not eligible for opening a second due to reasons such as loss of employment or a divorce need not worry about the past account as these conditions do not affect that. Wonderful, isn’t it, so give it a try.
