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Background: I am 26 and working for the UK subsidiary of a US based consultancy. I am currently contributing to the company's UK retirement scheme and share purchase program, but would like to kick off a US IRA as well.

Question 1: Am I able to open up and contribute to a Roth IRA, given that I only have income earned abroad(UK) in 2001? What if I do not or (or cannot) exclude all of that 2001 foreign earned income on IRS Form 2555? Does that give me the AGI I need to be eligible?

Yes, if you have compensation income not excluded by the foreign earned income exclusion, you are eligible for some form of IRA. If you meet the Modified AGI (MAGI)requirements, you may qualify for a Roth.

Question 2: My income was under the $110K maximum for Roth IRA eligibility in 2001, but may exceed this amount in 2002. What does this mean? Am I better off just going with a Contributory IRA? Or even with index funds not part of a retirement / tax deferred scheme? Does the fact that this is foreign earned income (see above) change the equation (as $76k could be 'excluded')

To determine eligibility for a Roth MAGI is used. Among other things the foreign earned income exclusion is added back to regular AGI. If your MAGI is over $110,000 you do not qualify for a Roth. For AGIs between $95,000 and $110,000 Roth eligibility is phased out. Below $95,000 you are qualified for a full Roth. Whether you would be better off in a traditional IRA or non-retirement index funds depends on present and future tax rates and whther you can just buy and hold or must trade.

Question 3: How much would it cost for a financial advisor to sort this out!!?

I imagine a CPA or CFP in England would charge $80-$160 per hour. Or you could handle it by E-mail.

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