Roth IRA. Why not pay Taxes on the Seed instead of the Harvest?

The old farmers use to say: 
"I'd rather pay taxes on the Seed, not on the Harvest".

It makes a lot of sense doesn't it since current tax laws allow us to contribute to a Roth IRA and pay the current tax rate which some consider to be a bargain, since historically rates were much higher at some point. No matter how large your Roth IRA gets, you will never, based on current law, be required to take any distributions, not pay taxes on the account again. Niether will your heirs if you didn't get to enjoy using your money.

Her's how it works.

Roth IRA contribution eligibility
If you have earned income, or your spouse has earned income and you file your taxes as Married    Filing Jointly.                                                                                                                                                                            

You can contribute at any age as long as your modified adjusted gross income (MAGI) falls below or within the limits below:

If your filing status is...	And your modified AGI is...	Then you can contribute...
married filing jointly or qualifying widow(er)	< $181,000	up to the limit
	> $181,000 but < $191,000	a reduced amount
	> $191,000	zero
married filing separately and you lived with your spouse at any time during the year	< $10,000	a reduced amount
	> $10,000	zero
single, head of household, or married filing separately and you did not live with your spouse at any time during the year	< $114,000	up to the limit
	> $114,000 but < $129,000	a reduced amount
	> $129,000	zero

How much can I contribute to my Roth IRA?                                                                                                                                                                                                                                                                

You can contribute 100% of your compensation – up to the annual contribution limit.                   

Those age 50 and older can make additional catch-up contributions.                                                                                                                                                                                                                                           

These limits, however, are reduced by any amount contributed to a traditional IRA.

Contribution Limits for 2013 and 2014
Individuals	$5,500
Age 50+	$6,500 ($5,500 + $1,000 catch-up contribution)

You can contribute to a Roth IRA anytime during the year and up to your tax-filing deadline (generally April 15).                                                                                                                                                                

Keep in mind that you must make contributions to your Roth IRA in cash, not with investments.

A Roth IRA Offers Two Kinds of Flexibility

1. How and When Money Is Withdrawn

• You can withdraw your contribution dollars at any time tax and penalty free:                    
• You can also withdraw earnings tax and penalty free, as long as you have owned a Roth IRA for at least five years and have reached age 59½.                                                                             
• The five-year clock starts with the first contribution.

• 2. No Required Minimum Distribution RMD:                                                                                                                                                                                                                                           

• Unlike a traditional IRA, a Roth IRA has no required minimum distributions (RMDs) when you reach age 70½.                                                                                                                                      
•  You control when you want to withdraw money.                                                                                                                                                                                                                                                                 
•  If you don't need the money in your Roth IRA for living expenses, you can leave it so that it can continue to potentially grow tax free.
• Sometimes it is beneficial to re-categorize your IRA or a portion of it into a Roth IRA, but remember, it is a taxable event and you will be required to pay the taxes due for the amount that was re-categorized (converted) to a Roth IRA in the year it was done.
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• I am not a CPA. This information s provided for educational purposes only. You should always consult a tax professional when dealing with tax issues. Roth-IRA-Contributions-That-You-Can-Make-for-2014