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Cheryl asks:<<So, to sum up. If you exceed the Roth AGI, you can recharacterize the contribution as a non-traditional IRA contribution (which would be part of your taxable income - because you have exceeded all AGI requirements) but would still acumulate interest tax free until distribution (assume this because its call a non-tradition IRA).>>Your understanding is correct.<<Does this require a new account to be setup (Roth, IRA, Non-traditional IRA)? How do you bookkeep that taxed contribution. You've already paid taxes on it. You shouldn't have to pay taxes at distribution. Do you keep a copy of tax return with account statement? Your co-mingling taxed deferred and taxed contributions. Yes you can recharacterize but were do you move the money?>>No, you don't have to establish a new IRA to receive the recharacterized contribution. You do, though, have to notify the traditional IRA and the Roth IRA providers in writing prior to moving the cash that you wish to take that action. The letter must contain some specific information for the successful completion of that action. Rather than going through the litany of how to do all that, I'll just refer you to the best information on the web concerning that topic. That can be fund at the Fairmark Press site at http://www.fairmark.com/rothira/rctop.htm. Read the series of articles there, and you will have a good idea of all that's required.The only other thing to keep in mind is that when you file your income tax for the year, you must include Form 8606 to show the nondeductible contribution to your traditional IRA that year. Keep that form forever as it becomes your proof you made such a contribution later when you begin withdrawals from the traditional IRA. It ensures you will not be taxed on that money again. See IRS Publication 590 (Individual Retirement Arrangements) for details.Regards..Pixy
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