Who is restricted from contributing to a Roth IRA?

The restriction on contributing to a Roth IRA primarily pertains to income limits. High-income earners are subject to phase-out thresholds that can significantly limit or completely prevent their ability to make direct contributions. As of the latest guidelines, individuals with adjusted gross incomes above certain levels are either prevented from contributing directly to a Roth IRA or have their maximum contribution reduced.

For example, if a person exceeds the income threshold set by the IRS for a given tax year, they cannot make contributions to a Roth IRA at all. This regulatory measure is designed to ensure that Roth IRAs, which offer tax-free growth and tax-free withdrawals in retirement, are available primarily to individuals within certain income brackets.

In contrast, individuals aged 50 or older are allowed to make catch-up contributions, which means they can contribute more to their IRAs as they approach retirement. Having a traditional IRA does not restrict contributions to a Roth IRA, as it is possible to possess both types of accounts simultaneously. Lastly, the requirement regarding the five-year rule pertains to withdrawal of earnings without penalty, not to the ability to contribute to a Roth IRA. Thus, the correct restriction is indeed related to high income earners.