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OLF writes:

I'm overseas, and using a 2555 (Foreign Earned Income Exclusion) which covers (sadly) all of my income for 2001. Since I'll be returning stateside this year, I won't be able to claim the exclusion for 2002 and will have to pay federal taxes, so I believe that I will qualify for the Roth contributions for 2002.

Unless you have some earned compensation (i.e., job wages) that are NOT excluded from possible income taxes, then you are NOT allowed to make an IRA contribution to either a Roth or a traditional IRA.

If I recharacterize to a traditional, will I later be able to change it back to a Roth or is it then set as a traditional until I retire?

Assuming you actually can make an IRA contribution, then you can recharacterize to a traditional IRA this year. Once that is done, you can't recharacterize to a Roth in some subsequent year. You can, though, convert that traditional IRA to a Roth IRA provided you meet AGI limits to do so in the year of the conversion (an AGI of $100K or less). When you convert, you must pay income taxes on all previously untaxed money that is in the converted traditional IRA.

If I do recharacterize my contributions from last year into a traditional, can I contribute to a Roth for 2002, and will this be even more complicated when I withdraw the money at retirement?

Again, if you have the earned compensation to do so, then you may contribute to either a traditional or a Roth IRA in 2002. For the latter, you must meet the AGI limits for you filing status in that year.

Also, since I do not have taxable income at all for 2001, would I even qualify for the traditional at all? I suppose that's really the first question.

Finally, we get to the nub of the matter. No job income to be claimed on your income tax return, then no IRA contribution. Period. End of discussion. :-)

I highly recommend you read our very thorough IRA area to gain a better understanding of the ins and outs of IRAs. You will find it at


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