Roth IRAs - American Funds

Roth IRAs

Get an in-depth look at the key features and benefits of Roth IRAs.

This table will help you take a closer look at the key features and benefits of Roth IRAs. Please note that the information provided in the table is for the 2020 tax year.


Your ability to contribute to a Roth IRA depends on your income level. (See Contributions for more information.)

Participation in an employer-sponsored plan does not impact your eligibility to contribution to a Roth IRA. Additionally, contributions can be made at any age as long as you earn income.


  • Amounts attributable to direct contributions can always be removed tax- and penalty-free.
  • Earnings on qualified distributions are tax- and penalty-free.
  • Required minimum distributions are not mandatory during your lifetime.
  • Contributions can continue as long as you earn income (no age limitation).


  • Your contributions are made with after-tax dollars; no deduction is available.
  • Your contribution limit is $6,000 (or 100% of compensation, whichever is less) for total contributions made to all traditional and Roth IRAs. If you are age 50 and older, you can make an additional catch-up contribution of up to $1,000.
  • Your contribution amount is reduced if your MAGI* is above $124,000 (single filer) or $196,000 (joint filer). Contributions are not allowed when your MAGI reaches $139,000 (single) or $206,000 (joint).


Earnings grow tax-free. Taxes and possible federal tax penalties apply on nonqualified distributions.


  • Qualified distributions are tax-free. Nonqualified distributions may be subject to taxes and possible federal tax penalties.

  • Distributions are considered to be taken in the following order:

    1. Contributions to the Roth, until depleted;

    2. Conversions and rollover contributions (on a first-in, first-out basis when more than one was made), each depleted in the following order:

      • deductible contributions
      • nondeductible contributions
    3. Earnings
  • There are no required minimum distributions during your lifetime.

Rules on Roth Withdrawals

  • Withdrawals of contributions are always income tax and penalty free.

  • If the first contribution was made at least 5 taxable years ago AND you have met one of the following conditions, the withdrawal is considered qualified:

    • Reach age 59½

    • Become disabled

    • Using the withdrawal for a first home purchase (up to $10,000 lifetime maximum)
    • Deceased
  • For nonqualified distributions, unless you met an exception as defined by the IRS, earnings will be subject to income tax and will incur a 10% penalty.  Exceptions include but are not limited to certain medical expenses or health insurance premiums for certain unemployed individuals.
  • If you withdraw money that has been converted, the taxable portion of converted amount is treated as income. Possible federal tax penalties apply if converted amounts are withdrawn before 5 years since the most recent conversion.

Rollover From Retirement Plans

  • Roth 401(k) and Roth 403(b) balances may be rolled over to a Roth IRA.
  • Roth and non-Roth balances may be rolled over to a Roth IRA regardless of your modified adjusted gross income (MAGI) or tax filing status. Non-Roth balances rolled over are subject to income tax.

Converting From a Traditional IRA

  • Assets in a traditional IRA can be converted to a Roth IRA regardless of your modified adjusted gross income (MAGI) or tax filing status.
  • The taxable portion of the converted amount will be treated as taxable income.
  • If you are also eligible to make Roth contributions, you may contribute to the same Roth IRA receiving your converted traditional IRA proceeds.
  • Your conversion must be initiated by December 31 of a given year to be considered a conversion for that taxable period.


If you want to reconvert to a Roth IRA, you must wait until the beginning of the new tax year following the tax year that you initially converted or a minimum of 30 days after the recharacterization was completed, whichever is later.

You are encouraged to discuss your conversion and options with your tax advisor or financial professional.

Your modified adjusted gross income (MAGI) is calculated by subtracting certain expenses and allowable adjustments from your gross income. To determine your MAGI, contact your tax advisor.

† Converting to a Roth IRA is a taxable event, and the rules and tax calculations can be complicated. State income-tax rules for conversions may differ from federal rules. We encourage you to discuss conversion options with your tax advisor or financial professional.

You can learn more about traditional and Roth IRAs in IRS Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs), and IRS Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs). We also encourage you to discuss your financial goals, eligibility and individual tax situation with your tax advisor or financial professional.

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