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I recently opened up Roth IRA accounts for my wife and I, but I am a bit confused on contribution limitations. We might be slipping over the AGI limit in 2008 and I am curious if this just means our contributions are not tax deductible or does it mean we are not allowed to contribute to the funds at all?

Actually, Roth contributions are not tax deductible, no matter what your AGI is.

The income limits are actually on your Modified AGI (MAGI). MAGI allows you to deduct things like 401(k) contributions, HSA contributions, etc. before determining if you are allowed to contribute. See IRS Publication 590 for details on how to calculate MAGI (

For MFJ, the 2007 MAGI limits are:

Up to $156k - full contributions allowed
$156k - $166k - pro-rated contributions allowed
Over $166k - contributions not allowed

If you are in the phase-out range or have reached the cut-off point and are not eligible, you can either withdraw your additional contributions and any earnings, or you can convert the contributions and earnings to a traditional non-deductible IRA. If you choose to withdraw, you will have to pay taxes on the earnings.

I am trying to decide whether I should dip into our emergency savings to fund each account to the $4000 limit for 2007 or just keep up my monthly contributions.

If you are close to the phase-out range and don't want to be bothered with the hassle of withdrawal or conversion, it may be better to wait until after you figure out exactly what your MAGI is before contributing any more. You are allowed to contribute for 2007 up to your tax filing due date in 2008, and even longer under some exceptions.

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