The Roth Individual Retirement Account

Avoid future taxes on your retirement funds with a Roth IRA.

A Roth IRA allows you to avoid future taxation of your retirement funds by making nondeductible contributions now. Contributions for the 2018 tax year can be made up to and including the 2018 tax-filing deadline (not including extensions). This includes contributions made to Discover Roth IRA CDs, which offer guaranteed rates, flexible terms, and FDIC insurance up to the maximum amount allowed by law.

Couple reviewing their IRA contribution

Rules of the Roth IRA

The following is a partial summary of the rules for Roth IRAs:

Contributions are limited to $5,500 a year for the 2018 tax year. Investors aged 50 and older can make an additional $1,000 “catch up” contribution annually. Contribution limits for the 2019 tax year are going up to $6,000 and also allow an additional $1,000 “catch up” contribution for investors aged 50 and over.

Income thresholds, such as your modified adjusted gross income (MAGIs), determine whether you are eligible to contribute to a Roth IRA. Your MAGI is your income before any deductions are taken out.

For the 2018 tax year, single taxpayers with MAGI between $120,000 and $135,000, and married couples filing jointly with MAGI between $189,000 and $199,000, are eligible for a partial contribution. Taxpayers earning less than these thresholds may make a full contribution. Those earning more are not eligible to contribute to a ROTH IRA.

For the 2019 tax year, single taxpayers with MAGI between $122,000 and $137,000, and married couples filing jointly with MAGI between $193,000 and $203,000 are eligible for a partial contribution. Taxpayers earning less than these thresholds may make the full contribution. Those earning more are not eligible to contribute to a Roth IRA.

Qualified distributions are tax free. To qualify, you typically must have maintained a Roth IRA for five years and be at least 59 1/2 years old. There are other exceptional conditions where you might be able to make a qualified distribution. Please discuss any special situation with a tax advisor.

Conversion of a Traditional IRA to a Roth IRA

Because IRA rules are complex, ask your financial advisor about the IRA strategy that’s best for you. Even if you decide not to convert assets to a Discover Roth IRA, you may determine that it makes sense to make a tax year contribution to a Discover Traditional or Roth IRA instead.

Retiring couple consulting with financial advisor

Discover

In addition to offering IRA CDs to help you grow your retirement savings, Discover also offers an Online Savings Account to help you with your short-term savings goals and a full range of CDs to help you save for the future. Open an account online  or call our 24-hour U.S.-based Customer Service at 1-800-347-7000. For IRA CD-related assistance, call 1-888-204-8966.

The article and information provided herein are not guaranteed by any party and are intended for educational purposes only. Other factors not represented in this article may influence the amounts you are able to contribute or deduct. The information included in the article is based on 2019 IRS limits. The information included is not advice and it may not reflect actual products, services, rates, APYs and/or terms available from Discover Bank. Nothing contained in this article is an offer, solicitation or guarantee for any product or service that may be available from Discover Bank. You may want to contact a financial advisor or tax professional with respect to information contained in this article and how it relates to you.

Banking 101

How to Choose a Checking Account Based on 4 Priorities

There's a perfect checking account for everyone. Find yours by evaluating these 4 checking account considerations.

Read Article

Saving

3 Things to Do With Your Tax Refund

If a tax refund is coming your way, now's the time to plan for how you'll use it.

Read Article

Sunny skies are the right time to save for a rainy day.

Start an emergency fund with no minimum balance.

Start Saving
Online
Savings

Discover Bank, Member FDIC

Money Hack: How to Automate Your Savings and See Results

Lifestyle

Are We There Yet? 5 Tips for a Frugal Road Trip

Coolers, cheap gas, a car checkup and other tips for enjoying your next road trip on a budget.

Read Article

Say hello to
cash back on debit
card purchases.

No monthly fees.
No balance requirements.
No, really.

See Details

Discover Bank, Member FDIC

The Essential Guide to Budgeting for New Homeowners

Retirement

Why You Need to Make a Retirement Budget Before You Actually Retire

A simple way to reach your goals.

Watch your savings grow with a CD.

Lock in Your Rate
Certificate
of Deposit

Discover Bank, Member FDIC