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MikeD
LSU Fan
Baton Rouge
Member since Jan 2004
1425 posts

Roth IRA Contributions



I was not allowed to contribute to my Roth IRA last year due to exceeding income limits. Single, no kids. I max out the company 401k and defer enough to hit IRS max on this as well.

Is there a way to convert either my 401k or another IRA to get allowable contribution into my Roth account?







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jimbeam
USA Fan
University of LSU
Member since Oct 2011
32014 posts
 Online 

re: Roth IRA Contributions


Back door roth





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foshizzle
LSU Fan
Washington DC metro
Member since Mar 2008
30145 posts

re: Roth IRA Contributions


Count your blessings, this is a good problem to have.

You'd have to check with your employer to see if the 401 can be rolled over before you leave your job. Most don't allow that. If you have a regular IRA you can recharacterize it as a Roth though. Of course, you have to pay the tax when you do and given your current income (and tax bracket) it might be smarter not to do this.






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foshizzle
LSU Fan
Washington DC metro
Member since Mar 2008
30145 posts

re: Roth IRA Contributions


quote:

Back door roth


Maybe could work, but there are caveats. The big one is that if you already have a large regular IRA you can get hit with a large tax bill b/c the existing balance is taxed too.

But if the OP has no (or has a small) regular IRA this could work.






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jimbeam
USA Fan
University of LSU
Member since Oct 2011
32014 posts
 Online 

re: Roth IRA Contributions


Yea I'm assuming he has no other Ira, in which case is just stick with that

Although arent regular iras not deductible if you have a 401k?? Or when can you not deduct it?






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MikeD
LSU Fan
Baton Rouge
Member since Jan 2004
1425 posts

re: Roth IRA Contributions


Yes I am lucky.

I don't have another IRA. Had a Roth for last few years until last year when I cracked limit. Previously I was hitting max in my Roth each year. Would it be better to not max my 401k, contribute 5k to IRA and then convert?

My thinking is, it's better to pay taxes now and get interest earnings from here on out tax free. Or I guess I can see keeping higher amount in tax bearing account and just pay taxes when it comes out.

So like I said, just looking for some advice.






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foshizzle
LSU Fan
Washington DC metro
Member since Mar 2008
30145 posts

re: Roth IRA Contributions


quote:

arent regular iras not deductible if you have a 401k


Absolutely they're deductible. They're not the same kind of account at all, even though the tax treatment of contributions is similar.






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MStant1
LSU Fan
New York, NY and Houston, TX
Member since Sep 2010
4195 posts

re: Roth IRA Contributions


I'd continue to max out the 401k. Have you considered an Annuity? There are no contribution limits and the earnings are tax deferred. They can have high costs though.


This post was edited on 11/12 at 10:29 pm


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jimbeam
USA Fan
University of LSU
Member since Oct 2011
32014 posts
 Online 

re: Roth IRA Contributions


Oh ok

Thought I had seen somewhere you couldn't deduct Ira if you made a certain amount and had a 401k

LINK

I have a roth anyway so not a big concern to me as of now



This post was edited on 11/12 at 10:34 pm


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Dooshay
LSU Fan
CEBA
Member since Jun 2011
29265 posts

re: Roth IRA Contributions


so when you do a backdoor roth you just let the 5500 compound since you won't be able to add anymore? i see that it's worth doing because of the tax advantages, but that's such a tiny part of your portfolio.







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HailToTheChiz
Auburn Fan
Behold, SKYWHALE!
Member since Aug 2010
8156 posts

re: Roth IRA Contributions


everyone seems to use roth ira rather than traditional....why is that? just due to pre tax distributions?





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joeygalloway9
LSU Fan
Baton Rouge
Member since Apr 2007
152 posts

re: Roth IRA Contributions


Where is the easiest place to open a "non-deductible" ira and then immediately convert to a Roth IRA? Can you do this online, or do I need to see a financial advisor of some sort?





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TheDiesel
LSU Fan
Houston via Baton Rouge
Member since Feb 2010
2447 posts

re: Roth IRA Contributions


quote:

everyone seems to use roth ira rather than traditional....why is that? just due to pre tax distributions?


Most assumptions are that you are meeting your employer match on a 401(K) if you are employed by a company that offers one.

Most follow this pattern:
1. 401(K) up to employer match
2. Max Roth
3. Max 401(K)






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Oenophile Brah
LSU Fan
The Edge of Sanity
Member since Jan 2013
5310 posts
 Online 

re: Roth IRA Contributions


quote:

I was not allowed to contribute to my Roth IRA last year due to exceeding income limits

This limit is $173-183k, but it's not AGI, correct?

Isn't a different calculation? MAGI?







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HailToTheChiz
Auburn Fan
Behold, SKYWHALE!
Member since Aug 2010
8156 posts

re: Roth IRA Contributions


So then in a situation with no 401k employer match, go traditional ira?





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TheDiesel
LSU Fan
Houston via Baton Rouge
Member since Feb 2010
2447 posts

re: Roth IRA Contributions


I'm pretty sure Roth uses AGI. For someone who is single like the OP the max is $114,000 before phasing out and ending at $129,000.





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Oenophile Brah
LSU Fan
The Edge of Sanity
Member since Jan 2013
5310 posts
 Online 

re: Roth IRA Contributions


quote:

For someone who is single like the OP the max is $114,000

Correct, sorry I was listing for joint filing.

Are you sure about AGI?

This is what I found. LINK

I believe they add back some of your deductions in calculating your income for roth limitations.






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MikeD
LSU Fan
Baton Rouge
Member since Jan 2004
1425 posts

re: Roth IRA Contributions


Yeah that's correct. Filing single had me maxed out at 127k.

So reading a little more... it seems to me that I can max out 401k ($15,500 or whatever it is), contribute $5,500 to traditional IRA (not deductible) and the convert the traditional to Roth. Does this sound right?







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foshizzle
LSU Fan
Washington DC metro
Member since Mar 2008
30145 posts

re: Roth IRA Contributions


quote:

Thought I had seen somewhere you couldn't deduct Ira if you made a certain amount and had a 401k


Your original statement was not the same:

quote:

arent regular iras not deductible if you have a 401k






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