Roth IRA income limits 2019 - YouTube

today I'm gonna talk about the Roth IRA contribution limits for 2019 I'm also

going to go over as you can see up on the board some of the facts and figures

how much you can save when to save how to save what is a Roth IRA good for if

this is your first time at our channel or you haven't subscribed click on the

subscribe button at the bottom my name is Travis sickle CERTIFIED FINANCIALPLANNER with Sickle Hunter Financial Advisors

so let's start out talking about what a Roth IRA is and how it works so it's a retirement account or

primarily a retirement account that you can put in earned income so these are

dollars that you're earning from a paycheck they put directly into the Roth

IRA it's going to go in it with after-tax dollars which are dollars that

you're getting in your paycheck so it's the money that you're getting from your

paycheck those are after-tax dollars that go into the Roth IRA they're gonna

grow tax-deferred and hopefully come out a hundred percent tax-free in retirement

now there's a couple of ways that you can pull it out early which I'm going to

go over in just a minute so before we do that let's talk about the contributions

or the changes for 2019 as you can see up on the board contribution limits have

increased by $500 to $6,000 so in 2018 and prior to that it was $5,500 a year

now it's $6,000 that's kind of nice and if you're 50 and over so if you're 50

and over you can do an extra $1000 bringing the total to $7,000 it's

important to know that it's 50 and over and not over 50 so if you're 50 or over

you can contribute an additional $1,000 so that's the maximum contribution now

what is a Roth I already good for so three things that I've pointed out right

here anything that you put into the Roth IRA you can pull out of so that's that's

called your contributions or your principal anything you put into the Roth

IRA so if you put in $500 today in two weeks you wanted to pull that rock that

money out of the Roth IRA you can so the money that you put into the Roth IRA you

can pull out now the growth that is a different story so let's say

let's rewind let's say that you put in five hundred dollars into the Roth IRA

six months later you decide you know I really need that money for whatever

reason I can pull it out tax and penalty free you've already paid tax on it so

that's why you're not going to pay additional tax on it and it doesn't have

a penalty because it's the contribution that you put into the Roth IRA now any

of the growth that is what will have the penalty and the potential tax liability

to it on the growth if you pull it out before age fifty nine and a half so to

be clear there is no five-year rule there is no rule that prevents you from

pulling out the money early as long as it's only the contributions so the

second one is looking at ten thousand dollars first-time homebuyer this one's

a little different and quite interesting so you could pull up to ten thousand

dollars out of your Roth IRA for your first home purchase now the other part

of it is you actually don't have to have your first home purchase you just can't

have owned a home in the last two years so if you haven't owned a home in two in

the last two years you could pull up to ten thousand out of your Roth IRA and

that includes growth so if you put in five thousand into the Roth IRA over

time it grew to say ten thousand you could pull every single penny out tax

and penalty free so that five thousand dollars of growth you'll have never paid

any tax for it as long as you use it for your first home purchase or the purchase

of a home that you haven't owned a home within two years and the third one is

looking at college tuition so with college tuition in a Roth IRA you can of

course pull out all the principal because as we've said in number one you

can pull out the principal at any time for any reason so if you want to use

that portion for college savings then you can on the growth side if you use it

for tuition you can pull that money out you can pull the growth out and avoid

the penalty so it's penalty free which is ten percent so you're not gonna have

to pay that that penalty but you will have to pay ordinary income on the

growth if you use it for college tuition so yes it is penalty free but it's not

taxed so if you use the same example as we did

with the first time homebuyer then five thousand would be the principle and you

had the additional five thousand in growth for college tuition that five

thousand of growth would be as taxable income now let's go through some of the

Roth IRA contribution limits or the amount that you can actually put into

the Roth given your income level so if you're married filing jointly or a

qualified widower and you make less than one hundred ninety three thousand you

can put in up to the limit now why didn't I just put in six thousand

because if you're 50 or over you can do an extra one thousand dollars that would

be seven thousand dollars so it depends if you're 50 or over would depend on if

you can do 6000 or 7000 so if you're under 50 and you're married filing

jointly and you make less than one hundred ninety three thousand then you

can put in up to six thousand dollars again if you're over fifty 50 or over

then you can do up to seven thousand dollars that would be your limit so with

married filing jointly if you're in the phase-out range so that's between one

hundred and ninety three thousand and two hundred and three thousand it's a

reduced amount its prorated and I'm going to go over the phase-out range and

how to do that math in just a minute but first I'm going to go through the rest

of these numbers so if you make over two hundred and three thousand you can't

contribute directly into the Roth IRA so it is zero you've exceeded the maximum

amount that you can put in but there are other ways to get money into the Roth

IRA but we're gonna save that for another video if you're married filing

separately it's extremely low most of it is it's less than ten thousand it's

always prorated and if it's over ten thousand that you're making an income

then it's a reduced amount excuse me it's zero so married filing separately

if you less if your income is less than ten thousand and it's a pro-rated amount

and that's the reduced amount so let's say it's five thousand then it's half

that's again the phase-out range so then you'd only be able to put in three

thousand if you're under fifty so that's less than ten thousand so married filing

separately doesn't doesn't allow you really to save into anything or get a

lot of the tax breaks that you could if you're single or married filing jointly

if you're filing separately and you did live with

your spouse at any point of the year you're gonna have a difficult time

saving into your Roth IRA because the limits are very very low and it goes up

to the single limits which are more favorable if you are married filing

separately and you did not live with your spouse at any point during the year

so single head of household or married filing separately less than 120 mm up to

the limit so again if it's six thousand then you can put in the six thousand if

you were in the phase-out range now this phase-out range is a little different it

goes from one hundred and twenty-two thousand to a hundred and thirty seven

thousand and again it's the same pro-rated amount so let's go through

some of the phase-out ranges I'll walk you through some of the math so if we

see right here married filing jointly let's take this phase-out range of a

hundred and ninety-three thousand to two hundred and three thousand and let's see

how that math works let me pull this board down so let's take a look at this

so we have a hundred and ninety three to two hundred and three thousand dollars

so we can put two so two hundred and 193 to 203 so that's what we're dealing with

so that's a range of $10,000 now let's say that we make a hundred ninety four

thousand dollars so what I'm gonna do is I'm gonna take a hundred and ninety four

thousand how much we've made and I'm gonna subtract the bottom range which is

one hundred ninety-three 193,000 that is going to give us one thousand dollars

now because we know that our range is ten thousand we're gonna subtract one

thousand from the ten thousand so it's ten thousand minus one thousand gives us

nine thousand so now let's take that nine thousand and divide it by again by

our range so we're nine thousand divided by our ten thousand is going to give us

90 percent so we can do 90% of our maximum limit in this case let's call it

six thousand dollars because we're gonna be under fifty years old so it's 90

percent of six thousand so what we can do is

6,000 times 90% or you could just do point 9 so if you're doing it on a

calculator to do 6000 times 0.9 and that's gonna give you fifty four hundred

dollars so this math will work for any amount that you make within the range so

if you did 195,000 - 193 there to be 2,000 bring the two thousand here it

would be eight thousand we bring it here eight thousand divided by ten thousand

would be eighty percent and so on and so forth so we'd be able to take 80% of the

six thousand so that's how you figure out the phase-out range now the math

will work the same and I'll bring the board back up

so you can see it again the math will work exactly the same and we can go

through it so the math will work exactly the same if we're looking at single head

of household or merely filing separately but the only difference is the range is

going to be different so down here you can see it's 122 - 137 so that's over a

larger range so you have $15,000 instead of 210 so the math would be a little bit

different so let's go through that math

so would be 120 2002 137 thousand so with the hundred and twenty-two - 137

thousand that's gonna be fifteen thousand dollars difference so the range

is going to be over that fifteen thousand so we're gonna do exactly the

same map so let's say that we make a hundred and twenty-five thousand in this

case so it's a hundred and twenty five thousand - again the lower range is 122

so it's 120 mm that's gonna give us three thousand three thousand dollars so

we want to do at this point is we're gonna take our fifteen thousand again

our range so it's gonna go here the range is gonna go here

fifteen thousand - there's three thousand three thousand is going to

equal twelve thousand

so we'll do the 12,000 divided by the 15,000 and that is going to give us our

80% so with our 80% we're gonna do 80% of the same of the same amount because

it's still the Roth IRA so we're still gonna do $6,000 so we'll do 80% of

$6,000 so again we'll go through the math twelve thousand divided by fifteen

thousand equals eighty percent so 80% of sollew the 6000 again multiply it in

this case you just put the point eight so the same when I put percent before or

you can put point eight either one's the same thing so that's gonna be 46 48

$4,800 so it here we're gonna have $4,800 so that is 80 percent of the

6,000 so that's how you get the phase-out range if you're single again

the math works exactly the same if you make twenty eight thousand you're gonna

128 thousand you put 128 here minus 120 to work the math the same way

that's the phase-out range if you're trying to save into the Roth IRA you can

do it in a lot of different ways you can save systematically daily weekly monthly

or annually however you want to save into it or you can wait until the end of

the year and do it right before you file or the April filing deadline so for 2019

you have all the way up until April the filing deadline in 2020 because in 2020

if April is when you're gonna do your taxes for 2019 so you can do it right

then and why would you want to do that why would you want to wait versus

starting now well if you're closer at the phase-out range you might not know

where you're gonna fall maybe you make a little bit more money maybe you make a

little bit less and then you won't have to deal with excess contributions

because if you over contribute into the Roth IRA whether or not it's phase-out

or more than $6,000 if it's more than the amount that you can contribute

you're gonna get a 6 percent excise penalty for the amount that's over the

limit so would avoid that you can just wait until the end of the year or you

can do it systematically now if you take the money out of the Roth before you

file because you made mistake and you can avoid that 6% it's

an easy fix but if you want to avoid it then you want to make sure that you're

doing it right before you file so there's a lot of different ways there's

no one right answer whether or not your font whether or not you are saving

systematically or at the end of the year you want to make sure that you're saving

the most you possibly can and the right amount I hope this has helped if you

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