IRA account

[Dzielak51]

I opened an IRA account over a year ago with ingdirect.com and put $500 in some low risk funds and a year later i was down like $50.  So for one, i cant stand watching paint dry and thats what i felt like i did during that year so i sold off the funds and ING offered sharebuilder for there customers so i started trading penny stocks last month and already tripled my money, but my question is, if you make more then the allowed yearly contribution what happens to the money?  I think the limit is $5,000 a year so if i turn that $500 into $6,000 what will happen to the other $1,000 if im only allowed to make $5K?

[cheffrey85]

I don't think there is a limit on how much you can make in a year, only how much you can deposit.

[Dzielak51]

ahhhhh, gotcha.

[Richmm63]

I don't think there is a limit on how much you can make in a year, only how much you can deposit.

This is right DZ, no limit on how much you earn.

[Mr. Halsey]

yeah 5k max... unless your over 55 years old (i think) at which point its 6k

and make less than 150k per year.

Hopefully, you got the roth?

[Dzielak51]

Yes, i got roth, which means i have to pay the taxes on my earnings correct?

[Patrick]

I dont think you pay on earnings. I think you pay what you put in. So if you put in 10k and turn it in 100k and when you withdraw you dont pay anything on it since you already paided on 10k

http://www.fairmark.com/rothira/roth101.htm

Distributions
Distributions from Roth IRAs are tax-free until you've withdrawn all your regular contributions. After that you'll withdraw your conversion contributions, if any. When you've withdrawn all your contributions (regular and conversion), any subsequent withdrawals come from earnings. Withdrawals of earnings are tax-free if you're over age 59½ and at least five years have expired since you established your Roth IRA. Otherwise (with limited exceptions) they're taxable and potentially subject to the early withdrawal penalty.