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Author: ushats Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75801  
Subject: make too much for IRA Date: 2/19/2012 2:41 PM
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Hi, I made too much and have a 403 at work and hence cannot contribute to IRA. however, I heard that I can contribute to IRA but not take the tax benefit ( have to submit some specific form to IRS)but soon after convert the IRA to Roth.
Can anyone help me? is what I heard correct?
I thought I can put $5000 in an IRA and use it to invest in dividend stocks for the long term.
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Author: JLC Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 70178 of 75801
Subject: Re: make too much for IRA Date: 2/19/2012 4:54 PM
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You can never make too much to CONTRIBUTE to an IRA. You can make to much to take the TAX BENEFIT.

Currently you can put $5000/year in.

JLC

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Author: ushats Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 70179 of 75801
Subject: Re: make too much for IRA Date: 2/19/2012 5:23 PM
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thanks for the correction

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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 70180 of 75801
Subject: Re: make too much for IRA Date: 2/19/2012 5:26 PM
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Hi, I made too much and have a 403 at work and hence cannot contribute to IRA. however, I heard that I can contribute to IRA but not take the tax benefit ( have to submit some specific form to IRS)but soon after convert the IRA to Roth.

It's true - to a point. You missed hearing a very important caveat. Do you have any other IRAs that have pre-tax money in them (traditional IRAs, rollover IRAs, etc.)? If so, when doing the conversion, the conversion will be taxed based on the % of IRA assets that are pre-tax. If you have pre-tax IRAs, the only way to convert 100% of the post-tax IRA contribution is to convert 100% of your IRAs to a Roth IRA.

See IRS Pub 590 for details.

AJ

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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 70186 of 75801
Subject: Re: make too much for IRA Date: 2/20/2012 3:15 PM
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I heard that I can contribute to IRA ... but soon after convert the IRA to Roth.

In another thread, you mention that you have a rollover IRA. That means this particular strategy doesn't work very well for you.

As AJ mentioned, you can't convert just your non-deductible IRA contributions. You have to prorate the non-deductible portion over all of your IRA accounts. That means only a portion of the conversion to a Roth IRA would be tax-free. Potentially a very small portion.

--Peter

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Author: ushats Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 70195 of 75801
Subject: Re: make too much for IRA Date: 2/21/2012 9:52 PM
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yes, i do have a roll over IRA. I thought I can open a new account and contribute $5000 and convert this alone. can i not do this?

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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 70198 of 75801
Subject: Re: make too much for IRA Date: 2/21/2012 10:03 PM
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yes, i do have a roll over IRA. I thought I can open a new account and contribute $5000 and convert this alone. can i not do this?

No, you can not.

Not in the way you want, which is to make the conversion completely tax free. You MUST include ALL of your IRA accounts, including SEP-IRAs, when figuring out how much of your Roth conversion is taxable.

--Peter

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