Roth IRAs

A Roth IRA is a type of Individual Retirement Account to which you make contributions with "after-tax" dollars, i.e., your contribution amount is taxed before you make it. Unlike with the Traditional IRA, your Roth contributions are never tax deductible, but withdrawals are free of federal taxes if you meet certain requirements. You can also contribute to a Roth IRA past age 70½ — an option that's not available with the Traditional IRA.

Contribution Limits/Rules

To be eligible for a Roth IRA contribution, you must have earned income for the year that's at least equal to the IRA contribution amount.

If you're eligible to invest in a Roth IRA, the contribution limits for the 2011 and 2012 tax years are $5,000 for each year, or $6,000 if you're age 50 or older. To learn about adjusted gross income requirements for making after-tax contributions to a Roth IRA, please call 800 842-2252.

Unlike with Traditional IRAs, you can contribute to a Roth IRA after age 70½ (provided you have earned income that's at least equal to the IRA contribution amount).

Withdrawal Rules

Because you make Roth contributions with after-tax money, you can withdraw your original contributions at any age, free of federal taxes and penalties. Additionally, you can withdraw your earnings federal tax free and penalty tax free, provided you have had the IRA for five years and satisfy one of the following conditions:

  • You've reached age 59½
  • You're using the funds for a qualified first-time home purchase (up to a $10,000 lifetime maximum)
  • You become disabled
  • You die. (Note that if you've had the Roth IRA for five years or more and you pass away, your beneficiaries will not owe income tax on withdrawals from the IRA, although they may be subject to estate tax.)
  • Any withdrawal that does not meet these conditions will generally be subject to a 10% IRS early withdrawal penalty.


The IRS may waive the 10% IRS early withdrawal penalty if distributions are used for:

  • Certain unreimbursed medical expenses
  • Medical insurance, providing certain conditions are met
  • A disability, if certain conditions are met
  • Payments received under a Substantially Equal Periodic Payment Plan over a five-year period or until age 59½ (whichever is longer)
  • Qualified higher education expenses
  • Qualified reservist distributions

Note that the 10% penalty tax generally does not apply to distributions to Roth IRA beneficiaries (although this penalty may apply to spouse beneficiaries who choose to treat the inherited Roth IRA as their own).

Unlike with Traditional IRAs, Roth IRA owners do not need to take minimum distributions once they reach age 70½.

A Roth IRA may be appropriate if:

  • You meet the eligibility requirements.
  • You believe you may be in a higher tax bracket when you withdraw the money.
  • You may want to withdraw your original contributions before retirement.
  • You may need to draw from retirement savings for education costs or a first home.
  • You may want to use your retirement savings for estate planning. Because Roth IRA owners do not need to begin withdrawing money at age 70½, the Roth IRA provides an advantage for people who want to leave their retirement assets to their heirs. Learn more about Building Your Legacy.
  • You're age 70½ or older and want to continue investing in an IRA.

Anyone can convert retirement savings to a Roth IRA, which may give you an opportunity for significant long-term savings in taxes. Learn more about Roth conversion rules.

Neither TIAA-CREF nor its affiliates offer tax advice. See your tax advisor regarding your personal situation.

The tax information contained herein is not intended to be used, and cannot be used, by any taxpayer for the purpose of avoiding any tax penalties that may be imposed on the taxpayer. It was written to support the promotion of products and services addressed herein. Taxpayers should seek advice based on their own particular circumstances from an independent tax advisor.

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