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Roth IRA Contribution and Income Limits in 2019

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

A Roth IRA provides generous tax breaks for retirement investing, but there are annual Roth IRA contribution limits that are affected by household income. These limits can change from one year to the next, and your age also affects how much you can invest.

“The 2019 Roth IRA contribution limit is $6,000 for those under age 50 and $7,000 for those over age 50,” explained Wes Brown, a certified financial planner and senior advisor with the financial advisory firm Rather &Kittrell.

This limit is the maximum you can contribute. As the table below shows, once your income reaches a certain level, Roth IRA contribution limits decline until you’re not allowed to contribute anything.

 

Eligible to contribute full amount ($6,000)*

Eligible to contribute reduced amount

Not eligible to contribute

  • Single

  • Head of household

  • Married filing separately (if you didn’t live with your spouse at all during the year)

$122,000

Income between $122,000.01 and $137,000

Income over $137,000

  • Married filing jointly

  • Qualified widow(er)

$193,000

Income between $193,000.01 and $203,000

Income over $203,000

  • Married filing separately (if you lived with your spouse)

$10,000

N/A

Income over $10,000

*This contribution limit is your combined contribution limit for both traditional and Roth IRAs.

Calculating your phase out contributions

If your income is below the threshold at which contributions start phasing out, it’s easy to know how much you can contribute. If your income is the range where you’re still allowed to contribute but can’t contribute the full amount, you’ll need to figure out your max Roth IRA contribution. Here’s how the math works out:

  • Calculate your modified adjusted gross income (AGI). Your modified AGI is your adjusted gross income with certain deductions added back in, including your deduction for IRA contributions.
  • Subtract from your modified AGI $193,000 if married filing jointly or a qualified widow;$0 if married filing separately and you lived with your spouse;or $122,000 for all other cases.
  • Divide the result by $15,000 ($10,000 if you’re married filing jointly, a qualifying widow or widower;or you’re married filing a separate return and you lived with your spouse during the year).
  • Multiply the resulting number by the normal maximum contribution limit.
  • Subtract the resulting number from the normal maximum contribution limit.

If you were married filing jointly and your modified AGI was $200,000, here’s what this calculation would look like:

  • $200,000 –$193,000 = $7,000
  • $7,000 / $10,000 = .70
  • .70 x $6,000 (the normal contribution limit if you’re under 50) = $4,200

Your maximum contribution would be $4,200.

Tax benefits of Roth IRA

Roth IRAs work differently than traditional IRAs or traditional 401(k)s. With these other retirement accounts, you put money in with pre-tax dollars but are taxed when you withdraw money. When you invest in a Roth IRA, you put in after-tax dollars but the money grows tax-free and is withdrawn tax-free.

Roth IRAs also differ from traditional IRAs and 401(k)s in another important way. As Brown explained, Roth IRAs aren’t subject to required minimum distributions (RMD). With traditional IRAs or 401(k)s, you’re required to start taking some money out beginning at age 70 and a half. RMDs ensure you withdraw funds so you can be taxed on them.

Roth IRAs aren’t subject to RMDs, which means you can allow the money to keep growing as long as you’d like. You can leave your money to your heirs and they won’t pay taxes on withdrawals either — and can stretch withdrawals out over time.

What if you make too much to contribute to a Roth IRA?

If you make too much to contribute to a Roth IRA, you have other options.

“Many 401k plans offer a Roth option,” explained Brown. “If available, they’re often the best place to make contributions since there are no income limitations and you can contribute up to $19,000 if you’re under age 50 and up to $25,000 if you’re over age 50.”

Brown also advised that you can make “backdoor” contributions to a Roth IRA if you’re eligible to contribute to a traditional IRA. Traditional IRAs have no income limits unless you or your spouse are covered by a workplace retirement plan.

You can contribute to a traditional IRA and convert it to a Roth just by submitting some simple paperwork to your plan administrator;however, you must pay taxes on money you’re converting.

This isn’t an issue if you convert in the same year. Let’s say you contribute $6,000 to your IRA, take a $6,000 deduction, then convert the traditional to a Roth IRA. You would pay taxes on the $6,000. However, if you contributed to a traditional IRA in 2017, took a $6,000 deduction and converted the traditional IRA to a Roth in 2018, your taxable income in 2018 would be $6,000 higher. Additionally, if your initial $6,000 contribution had grown to $6,500, you’d be taxed on the full $6,500 you’re converting.

Of course, you also have the option to contribute to a traditional IRA and just leave the money there, but if you or your spouse are covered by a retirement plan at work, the income threshold at which eligibility phases out for traditional IRA contributions is lower than the threshold for a Roth IRA.

Where to open a Roth IRA

You can open a Roth IRA at almost any financial institution. This includes banks, robo-advisors and brokerage firms.

The right place to open your account will depend on the following several factors:

  • How much help you want in managing investments. You’ll receive no help from a discount online brokerage. A robo-advisor, on the other hand, will ask simple questions and then allocate your money into an appropriate mix of investments.
  • Account minimums. Some financial institutions require a minimum deposit.
  • Investment options. Look for a financial institution that allows you to invest in a wide array of assets including individual stocks, Exchange Traded Funds and Mutual Funds.
  • Fees. Most discount online brokerages don’t charge fees for opening accounts. The general rule is that If you get help managing your money, you’ll pay fees. Fees for robo-advisors are typically pretty low, but you could pay a lot for management by a registered investment advisor or wealth management firm.
  • Commissions. You’ll generally pay commissions for buying and selling stocks and ETFs, but some brokerages offer commission-free ETFs or waive commissions if your balance is high.

What if you go over your contribution limit?

Keep careful track of contributions to your Roth IRA so you don’t go over the allowable contribution limit. However, if you do find that you contributed too much, you have a few options:

  • Withdraw the excess. Contact your plan administrator and request to withdraw the funds. You won’t be penalized for early withdrawal if you’re only withdrawing contributions above the limit, but if the excess funds earned a return, you also must withdraw the earned amount.
  • Move the contribution to the next tax year. You can apply over-the-limit contributions to the following tax year. If you went over in 2018, you could count some of the contributions as occurring in 2019. Just let your plan administrator know what you plan to do.

If you fail to be proactive about monitoring your contributions, you’ll end up owing a 6% excise tax on the contributions that exceeded your limit for the year. The excise tax is recorded on IRS Form 5329.

Knowing the max Roth IRA contribution limits is important. When you know how to calculate the amount you can contribute, you can make smart choices about investing for your future.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Christy Rakoczy
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Christy Rakoczy is a writer at MagnifyMoney. You can email Christy here

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Investing, Reviews

Fidelity Review 2019

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

With a whopping $6.9 trillion in assets under management, Fidelity is one of the country’s largest broker-dealers. That kind of size and power may seem like a detriment to some, but Fidelity’s focus on investor value, long-term planning, and fair and transparent pricing makes the Boston-based giant one of the industry’s more likable brands.

Fidelity offers an extensive array of investment products, including hundreds of proprietary mutual funds, index funds and exchange-traded funds (ETFs), and access to thousands of competitor fund investments. Its brokerage platform lets you trade international stocks, stock options and shares of initial public offerings. The firm also offers margin accounts and short selling capabilities for sophisticated investors. There is investing guidance available when you need it as well as 24-hour support. The best part? Lately, Fidelity has been on a mission to reduce the fees and expenses associated with being an investor.

Fidelity
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The bottom line: It’s not an overstatement to say Fidelity has something for every investor, with trading costs and account minimums that can’t be beat.

  • Full-service broker with a strong brand reputation
  • Extensive options for all investor types
  • Low or no fees and commissions on most products

Who should consider Fidelity

With much to offer, Fidelity is a great fit for many investor types. Beginner investors will appreciate the amount of guidance Fidelity offers to help you set a goal, create an investment strategy, and understand the benefits and risks of different asset classes. Once you’re ready to invest, Fidelity offers mutual funds with no minimum investment and no fees as well as no-fee brokerage accounts.

For index fund investors, Fidelity has four funds with 0% expense ratios and a roster of offerings that beat even low-fee giant Vanguard on price. Trading stocks or ETFs on the regular? Fidelity has low-cost trades, access to tons of research and a great platform for active traders. One company study found that even Fidelity’s bond prices are more competitive, saving investors an average of $14.55 per bond.

Fidelity fees and features

Current promotions

Get up to 500 free trades for two years when you fund an eligible account. The number of free trades is determined by the size of your deposit.

Stock trading fees
  • $4.95 per trade
Account minimum
  • $0
Tradable securities
  • Stocks
  • ETFs
  • Mutual funds
  • Bonds
  • Options
  • Futures / commodities
  • Forex
  • Crypto-currency
Account fees (annual, transfer, inactivity)
  • $0 annual fee
  • $0 full account transfer fee
  • $0 partial account transfer fee
  • $0 inactivity fee
Commission-free ETFs offered
Mutual funds (no transaction fee) offered
Offers automated portfolio/robo-advisor
Account types
  • Individual taxable
  • Traditional IRA
  • Roth IRA
  • 529 Plan
  • Joint taxable
  • Rollover IRA
  • Rollover Roth IRA
  • Custodial Uniform Gift to Minors Act (UGMA)/Uniform Transfer to Minors Act (UTMA)
  • Custodial IRA
  • SEP IRA
  • Solo 401k (for small businesses)
  • SIMPLE IRA (Savings Incentive Match Plan for Employees)
  • Trust
  • Guardianship or Conservatorship
Ease of use
Mobile appiOS, Android, Fire OS
Customer supportPhone, 24/7 live support, Chat, Email, 190 branch locations
Research resources
  • SEC filings
  • Mutual fund reports
  • Earnings press releases

Strengths of Fidelity

  • Low-cost trading. Considering its size and infrastructure, you might not expect Fidelity to offer a competitive commission rate of $4.95 per trade as well as no-commission trades on select ETFs. E-Trade and TD Ameritrade will cost you $6.95 per trade. Charles Schwab also offers $4.95 trades, but Fidelity edges ahead with lower margin rates for traders with large debt balances.
  • No-fee investing. The company made a bold move in 2018 by offering a handful of index funds with 0% expense ratios, no fees and no minimums.
  • Mutual funds. Fidelity offers more than 200 proprietary mutual funds, representing a diversity of asset classes and investment strategies. More than 100 of the firm’s funds currently have four- or five-star ratings (out of five) by Morningstar based on risk-adjusted returns. You also can access more than 10,000 competitor mutual funds, along with tools to help you screen funds according to features, ratings, returns, expenses and more.
  • Research and planning. When it comes to research, Fidelity hits the mark in multiple ways. As an asset manager, Fidelity’s global research is extensive. More than 400 analysts around the globe cover over 2,600 companies and generate tons of research. For the average investor, Fidelity offers information to help make stock trading decisions, build a fund portfolio and learn about IPOs. There are lots of tools and calculators for everyday financial planning as well.

Drawbacks of Fidelity

  • High minimums for new investor promotions. Fidelity offers between 300 and 500 free trades for two years when you open a new account with a minimum of $50,000 to $100,000. To be fair, these minimums are lower than those required for similar promotions from competitors such as Charles Schwab, E-Trade and TD Ameritrade, but it’s a hurdle for the average new investor.
  • Slow customer service. Overall, Fidelity gets fairly high marks for customer service, with its focus on investment guidance and education. But with a company this size, there are bound to be a few negative reviews. Fidelity’s tend to focus on the customer service and speed. Service representatives can be slow to respond to complaints, money transfers can take weeks, and many customer communications are sent through the mail, according to some customers’ comments.

Is Fidelity safe?

Fidelity uses sophisticated technology to safeguard client accounts and transactions. Accounts at Fidelity are encrypted with two-factor identification, requiring an extra step of replying to a text message when it comes to sensitive transactions. Voice recognition technology is used to authenticate your identity over the phone. Fidelity’s systems are under 24/7 surveillance, from security at local branches to monitoring transactions for identity theft and protecting Fidelity’s website with the industry’s strongest firewalls.

Fidelity accounts also are FDIC-insured for up to $250,000 and SIPC-insured for up to $500,000 per account.

Final thoughts

To be a successful investor, it helps to have the right tools. It also helps to understand exactly what you’re paying for so you don’t lose too much of your investment earnings to commissions and fees. Fidelity provides both to investors, which is meaningful for a company that’s been around for more than 70 years.

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Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Melissa Phipps
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Melissa Phipps is a writer at MagnifyMoney. You can email Melissa here

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Investing, Reviews

Charles Schwab Review 2019

Editorial Note: The editorial content on this page is not provided or commissioned by any financial institution. Any opinions, analyses, reviews, statements or recommendations expressed in this article are those of the author’s alone, and may not have been reviewed, approved or otherwise endorsed by any of these entities prior to publication.

Charles Schwab has been known as a discount broker for decades, and its online brokerage outfit maintains that reputation. But don’t think just because you’re not paying a lot that you don’t get a lot. For a competitive trading fee, you’ll receive great customer service, solid execution, an easy-to-navigate website with a sophisticated trading platform, and a wealth of research and educational tools. It’s really hard to go wrong with this venerable broker.

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The bottom line: With competitive pricing and excellent tools, Schwab is a great choice for any level of investor.

  • Trading platforms and tools for every level of investor
  • Excellent customer service
  • Low trading fees

Who should consider Charles Schwab

Schwab is going to do right by any level of investor. Beginners should love its extensive educational resources and its responsive customer service, while advanced investors should love its sophisticated trading platform. All investors will love its competitive pricing, with the benefits of a full-service broker.

Cost-conscious investors should love Schwab not just for its trading fees but also for its research and plethora of commission-free ETFs and no-load mutual funds. Anyone looking for a complete experience at a bargain price will feel right at home here.

Charles Schwab fees and features

Current promotions

500 free trades with a qualifying net deposit of $100,000

Stock trading fees
  • $4.95 per trade
Account minimum
  • $0
Tradable securities
  • Stocks
  • ETFs
  • Mutual funds
  • Bonds
  • Options
  • Futures / commodities
Account fees (annual, transfer, inactivity)
  • $0 annual fee
  • $50 full account transfer fee
  • $25 partial account transfer fee
  • $0 inactivity fee
Offers automated portfolio/robo-advisor
Account types
  • Individual taxable
  • Traditional IRA
  • Roth IRA
  • 529 Plan
  • Joint taxable
  • Rollover IRA
  • Rollover Roth IRA
  • Coverdell Education Savings Account(ESA)
  • Custodial Uniform Gift to Minors Act (UGMA)/Uniform Transfer to Minors Act (UTMA)
  • Custodial IRA
  • SEP IRA
  • Solo 401k (for small businesses)
  • SIMPLE IRA (Savings Incentive Match Plan for Employees)
  • Trust
  • Guardianship or Conservatorship
Ease of use
Mobile appiOS, Android
Customer supportPhone, 24/7 live support, Chat, Email, 346 branch locations
Research resources
  • SEC filings
  • Mutual fund reports
  • Earnings press releases

Strengths of Charles Schwab

  • Competitive trading fees and no minimum: Schwab makes it easy for those with little coin to get started in the investing game. Schwab’s pricing at $4.95 per stock trade (and $4.95 plus $0.65 per contract for options) puts it right at the standard for low-cost full-service brokers. Plus, its $0 account minimum means you can get rolling with even less. That’s a solid deal for all the other extras Schwab provides, including research and a professional trading platform. Compare that pricing to Fidelity at $4.95 per trade, while TD Ameritrade, E-Trade and Merrill Edge sit higher at $6.95.
  • Extensive research and educational tools: Speaking of research, Schwab offers a lot of it. From market commentary to stock screeners, advanced charting to Schwab stock lists, the broker offers many resources that allow you to ferret out interesting stock ideas. All of that is aided by stock pages with news, press releases and SEC filings to help you with your primary research. You’ll also receive free research from Morningstar, Ned Davis, Credit Suisse, CFRA and others. It’s a wide range of well-regarded reports. Meanwhile, those just getting started will benefit from online courses and modules that get you up to speed on how to invest.
  • Customer service: Need someone on the phone at 3 a.m.? Schwab can handle that. The company offers phone service 24 hours a day, seven days a week. But if you don’t need that level of service, Schwab also offers web chat and email. Plus, while Charles Schwab is known for its discount online service, the company also has more than 340 branches around the U.S., so you can stop by for a full consultation. You really can interact in any way that works for you.
  • Low-cost funds: Schwab has done a lot over the years to make investing low-cost, and its current selection of exchange-traded funds (ETFs) and mutual funds follows that tradition. The broker offers more than 250 no-commission ETFs, and these funds have no early redemption fees. You won’t have to guess which funds are covered, either, as the broker provides an easily searchable list that helps you sort for the kind of fund you’re looking for and provides details on the expense ratio and performance.Schwab doesn’t stop there, offering around 7,300 no-load mutual funds. These funds are sold without a sales charge (otherwise known as 12b-1 fees). But Schwab makes mutual funds even more investor-friendly by offering more than 4,000 with no transaction fee. So these are all savings that can be rolled into your investments.
  • Sophisticated trading platform: Schwab’s basic trading platform is completely serviceable — offering smooth, no-frills order entry that works if you’re entering a one-off order or not trading frequently. But for advanced traders who need efficiency, Schwab also offers a more robust platform, StreetSmart Edge.StreetSmart Edge is available on the web or as a downloadable app, and it includes free streaming data, a customizable trading layout and tools. It also provides the ability to expand the platform to multiple monitors. The app provides a stream of CNBC, and an all-in-one trade ticket allows traders to enter multiple order types and securities in just one window. Real-time news and screeners allow you to hunt for profitable ideas, while real-time trading alerts let you move on an idea immediately.

Drawbacks of Charles Schwab

  • Difficulty qualifying for new account bonus: While many brokers offer a nice bonus for any new trader, with Schwab you’ll have to deposit $100,000 to get it. But then Schwab rolls out the red carpet, with 500 free stock or options trades that are good for up to two years. Still, for that kind of deposit, you can sign up for 100 free stock trades every month from Merrill Edge, though without options trades. However, there is a more modest bonus available: If you can get a friend to refer you to Schwab and you open a new account, you can pocket a $100 bonus.
  • Pricey foreign stock trades: Pricey stock trades might not be a deal breaker, but if this is a must-have for you, then you’ll be better off somewhere else. Schwab charges at least $100 or 0.75% of the principal, with no limit, on stock trades placed directly on foreign exchanges, and you won’t be able to place an online or automated phone order. It’s important to note that this pricing does not include foreign stocks traded on American exchanges. However, if you’re looking to buy a foreign stock on the over-the-counter market, you’ll need to cough up an additional $50 foreign transaction fee, though you can place these trades online or via automated phone order.

Is Charles Schwab safe?

Charles Schwab has been around since 1971 and numbers 11.5 million active client accounts. Plenty of investors trust Schwab because it’s done right by them, and they’ve entrusted the company with about $3.4 trillion in assets under management. The brokerage is a member of the Securities Investor Protection Corporation (SIPC), which protects investors’ assets up to $500,000 per account (including up to $250,000 in cash only) if the brokerage is unable to return the assets. Investors still can lose money in the market, of course, because those investments are subject to risk.

Final thoughts

For a very reasonable trading fee, investors receive the full gamut of research, customer service, trading platforms, low-cost funds and a well-organized web interface. While many brokers are trying, it’s difficult to beat the total package that Schwab offers investors, and it’s simply hard to go wrong.

Schwab ranks among the best of the full-service brokers, and its most comparable peers include Fidelity Investments, Merrill Edge and TD Ameritrade, though the latter two charge higher trading fees.

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Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

James F. Royal, Ph.D.
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James F. Royal, Ph.D. is a writer at MagnifyMoney. You can email James here

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