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Author: JAFO31 Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75637  
Subject: Re: not eligible for roth Date: 5/6/1999 5:20 PM
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mtcunnin: You wrote, "I'm 26 years old and contribute to a 401k. Let's say I open a Roth IRA. (Starting young, very Foolish) Let's futher say that in 10 years or so, I am no longer able to contribute to a Roth IRA due to my income. (Dare to dream!!!) Then what? Are all my IRA options used up and/or am I stuck with regular taxable accounts?"

First, congratulations on starting young; you have the advantage of time to compound. I am no expert, but I believe that under the current rules you still could put $2,000 in a regular IRA, but it would not be deductible; it would have to be after-tax dollars. It would still compound tax-deferred, but you would owe income taxes upon withdrawal. All ussual disclaimers about earned income, $4,000 if marries, penalties for early withdrawal, etc.

In addition, buy and long-term hold of non or low dividend stocks that appreciate substantially lets you control the timing of the gain and payment of the lower long-term capital gains tax.

You also wrote, "Also, unrelated question, the Roth vs. Traditional IRA calculators use tax rate at retirement as a parameter. How the heck do I know what my tax rate will be at retirement??

Welcome to the wonderful world of financial planning. Make your best guess and run the numbers, then vary the guess and re-run the numbers to see how it changes and what you would do differently as a result. Revisit periodically (annually, maybe?) to see whether your assumptions have changed. Same goes for estimated returns, inflation, etc.

Good luck, JAFO
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