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Author: DarkOut Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75701  
Subject: Re: What else is new...IRA vs Roth Date: 12/7/1999 3:25 AM
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AJKaplan wrote:
I will be opening an IRA for the first time. My gross, non-adjusted income this past year was $70,000. I know I'm elegible to open a Roth, but next year, my gross non-adjusted income jumps to $110,000, which makes me eligible to contribute to a Roth only partially. The $110,000 salary will continue for 2 years and then take a dip to about $80,000.

We all wish we had this problem!

Anyway, you don't mention if you're married and that makes a difference to the Roth contribution limits. If single, $110K is the complete cutout, ie. no Roth contribution allowed (the sliding scale starts at $90K). If married and filing jointly, if your combined AGI is $150K or less, you can make the full Roth contribution of $2000.

In any event, even if you're in the cutoff band, it makes sense to make the maiximum Roth contribution you can. Now, it's up to you whether funding a non-deductable Tradtional IRA is the right option afterwards. I'd go to a taxable account first with LTB&H to get better tax treatment (ie. long term capital gains rate is lower than your tax bracket). And there's no limit to how much you can dump into a taxable account.

If you're fairly sure you'll be in a border area re: hte Roth contribution levels, you might consider upping your 401(k) contributions to lower your AGI and thus sneak in under the limits. Assuming you have a 401(k), of course.

Hope this helps.

--Joe
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