**CROSS POSTED TO TAX BOARD**Hello:I need some advice from the tax guru's.My wife and I started IRA's this year. I have a 401k here at work, so I started a ROTH. She doesn't so I started a classic IRA for her. In December she will be able to participate in a 401k at her office. Our combined income is about $145k per year.The way I figure it, we are fast approaching ineligibility.Should I convert her IRA to a ROTH? Should I stop putting money into it and open another ROTH for her?Thanks,Splotto
The way I figure it, we are fast approaching ineligibility.You will not be able to deduct an contribution for 2003 given your AGI.Caveat-your AGI is generally less than your income, that said, you should still be eligible for a Roth contribution.Remember you can ALWAYS make a nondeductible contribution, however, I believe the earnings would be subject to taxation when withdrawn.You appear to be inelgible for converting your traditional.IRS PUB 590 www.irs.govbuzman
You have until tax day next year to make your this years contribution. By that time you will know what your adjusted gross income is for the year and whether or not your quality for a Roth. You should make Roth contributions in any year in which you qualify.If you don't qualify for a Roth contribution, you should make a conventional IRA contribution instead. However, once your salary gets past being close to the Roth limit, you may want to consider making sure you max your 401K plan (including after tax) before you make conventional IRA contributions. You will at least want to make sure your contribution to 401K gets the maximum employers match.Note any year your income falls below the Roth limits, you will be able to convert any conventional IRA accounts to Roths--though the amount converted gets added to your taxable income and is taxable.Best of luck to you.
BUZ: I guess my question is: If I can't convert, do I just leave the IRA account there and open a new ROTH for her?Splotto
pauleckler: "Note any year your income falls below the Roth limits, you will be able to convert any conventional IRA accounts to Roths--though the amount converted gets added to your taxable income and is taxable."I believe that this is only a true statement for a single person.100k AGI limit to open Roth, same 100k AGI limit to convertIIRC, for a married couple, it is 150k AGI limit to open Roth, but same 100k AGI limit to convert.Gurus on the Tax board will cover this.In addition, if the IRA is for the current year, you may be able to "recharacterize" your contribution, rather than convert. I do not recall deadline for recharacterization.Gurus on the Tax board will cover this, too.And it is probably covered in the FAQ on the Tax board, also.Regards, JAFO
Our combined income is about $145k per year.At this income level, you may want to consider carefully what your income will be like when you retire. There are times when the general advice doesn't apply and you may be better off with a taxable account. Consider taxes, estate issues and control over taking gains.rad
BUZ:I guess my question is: If I can't convert, do I just leave the IRA account there and open a new ROTH for her?Splotto You can only make on 3k contribution per year. My custodian (TD Waterhouse) will let me withdraw my 2002 traditional contribution and fund a new ROTH for 2002. Since I have not deducted it from my 2002 taxes, I'm good to go.Also check the FAQ at Tax Strategies Board. Absolutely the most coherent explaination of retirement accounts that I have ever seen.buzman
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