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IRA problem with MAGI
Posted on 2/13/12 at 11:41 am
Posted on 2/13/12 at 11:41 am
After what seems like an eternity my spouse will finally finish their last year of fellowship and join the working world. Problem is that going forward no matter how we file our MAGI will be over the income limits to participate in a Roth IRA and beyond the limit to deduct contributions to a Traditional IRA.
Neither of us participate in an employer plan so any thoughts on what we should do? We won't be able to participate in the old underperforming Roth I have set up so should we just junk it? My understanding is that you can't convert a Roth to Traditional (could be dead wrong) and I'm not even sure that would be a good idea considering that we can't deduct our contributions to a Traditional IRA. Appreciate any insight you all have and if I've gotten any of the details wrong regarding Roths and Traditionals please correct me.
Neither of us participate in an employer plan so any thoughts on what we should do? We won't be able to participate in the old underperforming Roth I have set up so should we just junk it? My understanding is that you can't convert a Roth to Traditional (could be dead wrong) and I'm not even sure that would be a good idea considering that we can't deduct our contributions to a Traditional IRA. Appreciate any insight you all have and if I've gotten any of the details wrong regarding Roths and Traditionals please correct me.
1
Posted on 2/13/12 at 11:59 am to Quigley
do you choose not to participate in a plan at work, or is there no plan for you to contribute to at work?
Posted on 2/13/12 at 12:02 pm to simonizer
I'm in a small law firm and she's joining an OBGYN REI practice group in July that doesn't have an employer plan. So neither of us has the option of participating in an employer plan.
Posted on 2/13/12 at 12:34 pm to Quigley
is she strictly an employee of the practice group or will she be a partner?
and, you can still contribute to a traditional ira even though you cant take the deduction. you will have a basis in your ira that will cause portions of your distributions to not be taxable.
and, you can still contribute to a traditional ira even though you cant take the deduction. you will have a basis in your ira that will cause portions of your distributions to not be taxable.
Posted on 2/13/12 at 12:45 pm to simonizer
She'll be an employee with partnership eligibility after 3 years.
Can we convert the Roth to a Traditional IRA(don't think this is possible, but not sure) or should we just scrap the Roth and put the funds to use elsewhere? Had the Roth for 7 years. Minimal earnings from the Roth so we would basically only be withdrawing the contributions.
Appreciate your answers. Thanks
Can we convert the Roth to a Traditional IRA(don't think this is possible, but not sure) or should we just scrap the Roth and put the funds to use elsewhere? Had the Roth for 7 years. Minimal earnings from the Roth so we would basically only be withdrawing the contributions.
Appreciate your answers. Thanks
This post was edited on 2/13/12 at 12:46 pm
Posted on 2/13/12 at 1:20 pm to Quigley
leave the roth alone if you dont need the money. maybe try and find better investments within that account.
you should probably talk to a financial plannner/advisor to set some long term retirement goals. they may be able to offer more suggestions to tax defer some of your money for retirement.
you should probably talk to a financial plannner/advisor to set some long term retirement goals. they may be able to offer more suggestions to tax defer some of your money for retirement.
Posted on 2/13/12 at 4:00 pm to Quigley
quote:
Can we convert the Roth to a Traditional IRA(don't think this is possible, but not sure) or should we just scrap the Roth and put the funds to use elsewhere? Had the Roth for 7 years. Minimal earnings from the Roth so we would basically only be withdrawing the contributions.
You do NOT want to do that, Roth is the best thing going in your situation. What you can do is a backdoor Roth, ie contribute to non-deductible TIRA for 2011/2012 (2012 if it is the period you are contemplating), then convert the TIRA contribution to Roth since you will already have paid taxes on the 2012 contribution to the TIRA, then the Roth account continues to grow tax free. You and your wife can both do this. See here for full discussion:
LINK
It is not the form of retirement account that is limiting growth of the assets, it is your mix/asset allocation of investments in the account and amount of contributions/timing.
Posted on 2/13/12 at 4:50 pm to tirebiter
Backdoor is way to go
This post was edited on 2/13/12 at 4:51 pm
Posted on 2/13/12 at 4:52 pm to tirebiter
Great info thanks
Posted on 2/13/12 at 8:21 pm to Quigley
Drop me a line at jrobi27@gmail.com if you're still looking for guidance.
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