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Greetings, Cvisick, and welcome. You asked:

<<1. If I were to open a Roth IRA and then learn at tax time that my AGI was too high, what would be the effect on my taxes and my IRA?

My assumption is, but I can't find the answer, that I would have to (be able to) recharcterize the IRA as a conventional IRA.>>

You are correct. As long as the recharacterization to a traditional IRA takes place by April 15 of the year following the year of contribution or conversion to a Roth, there will be no adverse tax consequences to you.

<<2. If my AGI is too high, does it still make sense to open a conventional IRA?

I guess the benefit is that I wouldn't be taxed on gains when I traded through the IRA and the value of the benefit depends on how often I traded and how large the gains or losses were when I traded.>>

Precisely. It depends largely on how and in what you invest. Remember that any growth in a nondeductible traditional IRA will be taxed at ordinary income tax rates. OTOH if you invest in a taxable investment wherein you can achieve long-term capital gains, the tax rate on that growth would be less.

<<3. Changing to Education IRAs, if my AGI is too high, can I make a gift of $500 to each child and have them each establish an Education IRA?>>

No. The gift is not earned compensation for the purposes of making a contribution to an EIRA. However, you may contribute $500 to an EIRA for each child.

<<4. Finally, what don't I know that I should know about tax-effcient investing in my situation? (A small question, I know.)>>

Regardless of your situation you should know as much as you can about the tax impacts of any investment choice you make. That's the only way you can avoid making a cost-inefficient choice through lack of knowledge. As to what you don't know that you should, you first have to disclose fully what you do know. Otherwise, we can't answer the question. :-) However, one way to learn is to poke around the various areas of Fooldom. Seeing as you're interested in IRAs, try the IRA area at first, and then take a peek at our Retirement area at Both the primer and the 13 Steps in the latter will help increase your knowledge somewhat.

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