Unlocking the Mysteries of Roth IRAs: How AI Legalese Decoder Can Guide New Investors Through Common Questions
- May 27, 2024
- Posted by: legaleseblogger
- Category: Related News
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## Considerations for Roth IRA Contributions
Hello, I’m 19 years old and contemplating starting a Roth IRA. As I delved into the rules, I discovered that one cannot contribute more than their earnings for the year. In 2023, I made about $500 from a part-time job in high school. However, I have since landed a new job and my earnings have increased.
Given that it is now 2024, am I allowed to contribute more than the $500 I made in the previous year? Or am I restricted to only contributing $500 or less, in accordance with my 2023 earnings? I apologize if this question appears self-evident, as I am simply seeking to expand my knowledge on the matter. Thank you for your assistance.
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It’s based on the current year so January-December 2024 income. Though you have until tax day in April 2025 to contribute for this year!
2023 = $500 NO exceptions. You are not special enough and neither am I.
2024 = whatever you earn this year.
Congrats on starting a Roth IRA!! You are putting in low taxed or NO TAXED dollars now, so when you retire in 46 years or so, all that money will be TAX FREE!!
BONUS!! When you turn 59 1/2 you can cash out the entire Roth IRA with no penalties and no taxes.
If you keep diligent records of your contributions each year, you can even withdraw that money with no penalty.
You cannot withdraw the earnings though.
Example
For the next 10 years you contribute $2000 each year, for a total of $20,000 contributed.
In 10 years, your account is worth $50,000. $20,000 you put in, $30,000 in account earnings.
OMG, you need money. You can remove $20,000 from the Roth IRA, the money you put in, no taxes, no penalties. But if you touch that $30,000 in earnings, oh, the IRS is going to ding you, they want their money.
Earned in the current year…so what you earned in 2023 is irrelevant. You can contribute up to the amount you earn in 2024.
New Year so new salary cap. You can now put in up to 7k or whatever you made that your. If you aren’t sure if you will him 7k this year you can wait till next year and before taxes are do you can do catch-up contributions to put in more for this year.