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URL:  http://boards.fool.com/lets-try-again-since-all-of-the-previous-replies-30667619.aspx

Subject:  Re: 401k max and and Roth Date:  5/4/2013  2:03 PM
Author:  ptheland Number:  72186 of 75383

Let's try again, since all of the previous replies are either incomplete, make some significant unstated assumptions, or are partially wrong.

Your Roth IRA and your 401k are completely separate. They have no bearing on each other. So all you are concerned about are the rules for Roth IRA contributions.

If you are married, the income limit for Roth contributions is about $170k. For single people, it's around $110k. (I'm using approximations, as these limits are indexed for inflation each year and I'm not at work, so I don't have the exact figures for 2013 in front of me.)

If your income is under these amounts, you can make a Roth IRA contribution. If your income exceeds these amounts, your maximum Roth IRA contribution is limited. And if your income exceeds the limit by $10k for married folks or $15k for singles, you cannot make a Roth IRA contribution.

However, there is a trick commonly referred to as a "backdoor Roth". Anyone with earned income can make a traditional IRA contribution. And there are no income restrictions on conversions from a traditional IRA to a Roth IRA. So you make a contribution to a traditional IRA, which is typically not deductible or you elect to be not deductible. Then you immediately convert that to a Roth IRA.

One significant issue with the conversion is that you must have no other traditional IRA accounts. That's because you must consider all of your IRA accounts when making a conversion from traditional to Roth. If you have any non-deductible contributions in your IRA accounts, those will be prorated across all of your IRAs when you make a withdrawal or a conversion. You can't just convert the non-deductible contributions.

--Peter
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