Categories: Income

Why Do Roth IRAs Have Income Limits? Explained


Roth Individual Retirement Accounts (IRAs) have income limits so that the account holders can access the tax advantages associated with the accounts. Roth IRAs are funded with after-tax contributions, but earnings growth is not taxed as long as the funds remain in the account. By ensuring that most of the individuals taking advantage of this type of retirement account are lower- or middle-income earners, Congress has sought to protect the tax-free status of growth and distributions from the account. Additionally, as with all IRAs, the contribution limits are designed to prevent individuals from accumulating too much wealth while also ensuring that no single person accumulates enough to be excluded from Social Security benefits.

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