IRA: Roth & Traditional  >  IRA Basics  >  Roth IRA Account Details

Roth IRA Account Details

The Roth IRA enables investors to make non-deductible contributions into a retirement account whose earnings grow tax free and can be withdrawn tax free at retirement.1,2 In contrast, Traditional IRA earnings are taxed when withdrawn.

Advantages

  • You may withdraw earnings tax free and penalty free beginning at age 59½ if the account is at least five years old.1
  • You may withdraw contributions tax free and penalty free at any time.1
  • There is no required minimum distribution.
  • You may contribute to a Roth IRA as long as you want, provided you have compensation.
  • The beneficiaries of your Roth IRA will not have to pay income tax on account assets if it was open for at least five years.1, 2

Eligibility

  • You must receive taxable compensation.
  • Modified Adjusted Gross Income (MAGI)3 limits:
    2020: Married Filing Jointly: < $196,000; Single: < $124,000
    2021: Married Filing Jointly: < $198,000; Single: < $125,000
  • Eligibility phases out at:
    2020: Married Filing Jointly: $206,000; Single: $139,000
    2021: Married Filing Jointly: $208,000; Single: $140,000
  • For taxpayers who are married filing separately, eligibility phases out between $0-$10,000.

Investment Choices

  • Funds held directly with American Century Investments®: Select from a variety of mutual funds based on your risk tolerance and investment objectives.
  • American Century® Brokerage: Choose from over 10,000 mutual funds, as well as publicly traded stocks, bonds, and more.

Minimum Initial Investment

  • Funds held directly with American Century Investments: $1,000 per fund. Some funds may require higher minimums.
  • American Century Brokerage: $1,000 per account.

Annual Contribution Limits4

Annual Contribution Limits for Individuals

  • 2020: $6,000
  • 2021: $6,000

Annual "Catch-Up" Contribution Limits for Individuals Age 50 and Older (in addition to annual contribution)

  • 2020: $1,000
  • 2021: $1,000

Conversions

You may convert all or part of your Traditional IRA to a Roth IRA regardless of income limits.

While conversions are penalty free, the amount you convert that has not previously been taxed, including earnings, must be included as taxable income and could potentially move you into a higher tax bracket. Taxes will be due when you file your income tax return for the year in which you converted.

Once you convert from a Traditional IRA to a Roth IRA, your new IRA investment and any accumulated earnings will grow free of federal income taxes, provided you meet the conditions described in the Withdrawals section below

Withdrawals

  • Tax-free, penalty-free withdrawals if you are at least age 59½ and the account is at least five years old.1
    • When an IRA is converted to a Roth IRA, withdrawals within five years of conversion may be taxed and penalized, if under 59½ and an exception does not apply. The 5-year period is separately determined for each conversion starting with the first day of the tax year in which an amount was converted from a Traditional IRA to a Roth IRA.
    • If you take a withdrawal before age 59½ for either type of IRA, you could face a 10% penalty.
  • Withdrawals for special purposes may be permitted prior to retirement. 

Distributions

Minimum distributions are not required at any age. However, if your estate includes Roth IRA assets after your death, your beneficiaries will have to take required minimum distributions

Service Fees

  • Funds held directly with American Century Investments: A $25.00 annual account maintenance fee is charged to investors whose total investments with us are less than $10,000 for each taxpayer identification number (for example, Social Security number).
  • American Century Brokerage: A $50 annual custodial fee is charged per account. This fee is waived for Platinum, Gold and Silver Priority Investors or if the balance of the account is over $10,000. See Fees and Commissions for more information.

Secure Online Account Access

  • Simply create a User Name and Password and Log In for secure online account access, to:
  • View account balances
  • Conduct online transactions
  • View online statements and tax forms (if available)
  • Perform account maintenance, such as changing your address*
  • And more.

* Certain online transactions and maintenance are not available for all accounts, including American Century Brokerage accounts.

1 State and local taxes may apply.
2 Estate tax may apply.
3 Modified Adjusted Gross Income (MAGI) is your Adjusted Gross Income (AGI) with standard deductions included.
4 Annual contributions to a Roth IRA are not tax deductible.

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IRS Circular 230 Disclosure: American Century Companies, Inc. and its affiliates do not provide tax advice. Accordingly, any discussion of U.S. tax matters contained herein (including any attachments) is not intended or written to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with American Century Companies, Inc. of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties.

This information is for educational purposes only and is not intended as tax advice. Please consult your tax advisor for more detailed information or for advice regarding your individual situation.

This information is for educational purposes only and is not intended as a personalized recommendation or fiduciary advice. There are different options available for your retirement plan investments. You should consider all options before making a decision. Our representatives can help you evaluate all of your distribution options.

Brokerage Services are provided by American Century Brokerage, a division of American Century Investment Services, Inc., registered broker/dealer, member FINRA, SIPC.