What Are the Benefits of Roth IRAs?
Tax-Free Earnings & Withdrawals
If the account is at least five years old and you are at least age 59½, you may withdraw your earnings tax free and penalty free at any time. You may also withdraw contributions tax free and penalty free at any time.1
Tax Free for Beneficiaries
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
No Required Minimum Distributions
Minimum distributions from your Roth IRA are not required at any age.
Multiple Uses Other Than Retirement
The IRS allows "special purpose" withdrawals under specific conditions, such as buying a first home or paying for higher education.
Who Is Eligible?
You or your spouse (if one of you are not working and you file a joint return) must have earned income during the year. You may also contribute to a Roth IRA as long as you want, as long as you have earned income.
How Much Can I Contribute?
Annual contribution limits are listed below. If you are age 50 or older, you can contribute an additional amount—called a catch-up contribution—to your IRA each year. If you are married and your spouse is not working, you may also make a spousal contribution into an IRA under your spouse's Social Security number.3
Annual Contribution Limits4 | Annual Catch-Up Contribution Limits (age 50 or older) | |
|---|---|---|
Single – 2024 | $7,000 | $1,000 |
Married Filing Jointly – 2024 | $14,000 | $2,000 |
Whether or not you can make the maximum Roth IRA contribution depends on your tax filing status and your modified adjusted gross income (MAGI). Your contribution can be reduced or "phased out" as your MAGI approaches the upper limits of the applicable phaseout ranges listed below.
Modified Adjusted Gross Income (MAGI)5 limits |
| |
|---|---|---|
Single – 2024 | < $146,000 | $161,000 |
Married Filing Jointly – 2024 | < $230,000 | $240,000 |
MAGI is your Adjusted Gross Income (AGI) with standard deductions included. | For taxpayers who are married and filing separately, eligibility phases out between $0-$10,000. |
What Are My Investment Options?
You can hold investments such as mutual funds and exchange-traded funds (ETF) in a Roth IRA through our brokerage service.
Mutual Funds
Select from a variety of no-load mutual funds based on your risk tolerance and investment objectives.
ETFs
Our ETF lineup offers a comprehensive range of active strategies, available through our brokerage service.
Diversified Portfolios
Multi-asset funds combine stocks, bonds and short-term investments.
Brokerage
Choose from more than 10,000 mutual funds from other fund families, as well as ETFs, publicly traded stocks, bonds and more.
Additional Details
Traditional IRA to Roth IRA Conversions
You may convert all or part of a 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
You can take 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 age 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.
Minimum distributions from a Roth IRA 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.
Other Investment Costs
Funds held directly with American Century Investments: If your total investments are below a certain threshold, your account will be subject to an account maintenance fee. Refer to the Service Options flyer for details about this fee, including how you can have the fee waived.
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.
State and local taxes may apply.
Estate tax may apply.
Exception for Married Filing Jointly: An employed spouse may contribute to a separate IRA on behalf of a spouse who has little or no income. The amount of the couple’s combined contributions can’t be more than the taxable compensation reported on their joint return. For more information, refer to Spousal IRA sections in IRA Publication 590-A.
Annual contributions to a Roth IRA are not tax deductible.
Modified adjusted gross income (MAGI) is your adjusted gross income (AGI) with standard deductions included.
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.
Please consult your tax advisor for more detailed information regarding the Roth IRA or for advice regarding your individual situation.
Taxes are deferred until withdrawal if the requirements are met. A 10% penalty may be imposed for withdrawal prior to reaching age 59½.
IRA investment earnings are not taxed. Depending on the type of IRA and certain other factors, these earnings, as well as the original contributions, may be taxed at your ordinary income tax rate upon withdrawal. A 10% penalty may be imposed for early withdrawal before age 59½.
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.
This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.
Diversification does not assure a profit nor does it protect against loss of principal.