You must have earned income from wages to contribute to a Roth IRA or a traditional IRA. IRA withdrawals taken prior to age 59½ may be subject to a 10% federal income tax penalty, with certain exceptions such as those mentioned above. Withdrawals from traditional IRAs are taxed as ordinary income. Required minimum distributions must begin once traditional IRA account holders reach age 72 (the previous RMD start age of 70½ still applies for anyone who reached it on or before December 31, 2019). Set Up Tax-Free Income for Later A Roth IRA is funded with after-tax dollars, so there is no up-front tax savings. However, Roth IRA owners can look forward to a time when their qualified distributions will be tax-free, regardless of howmuch growth the account experiences (under current tax law). A qualified distribution is one that meets the five-year holding requirement and takes place after age 59½ or results from the owner’s death or disability. A Roth IRA can be a flexible way to save for retirement as well as other needs. Contributions (not earnings) can be withdrawn without penalty at any time, for any reason. There are also some convenient exceptions to the 10% penalty for early withdrawals of earnings. For example, a penalty- free IRA distribution could be used to purchase a first home ($10,000 lifetime maximum), to pay qualified higher-education expenses, or to pay unreimbursed medical expenses that exceed 7.5% of adjusted gross income. Eligibility to contribute to a Roth IRA phases out at higher modified AGI levels. In 2022, the phaseout starts at $129,000 and ends at $144,000 for single filers; for joint filers, the phaseout starts at $204,000 and ends at $214,000.