Comments on: 2007 Roth and Traditional IRA Contributions

By: mapgirl

mapgirl — Thu, 27 Sep 2007 12:26:37 +0000

Thanks for the comments. You must understand these accounts were opened before Roths existed or well understood, so I’ve always had them.

By: dong

dong — Thu, 27 Sep 2007 03:18:16 +0000

I’m lazy with my contributions and don’t make them until the next year. My income can be very volatile so I don’t know what I qualify for or not.

Though I’m suprised that you weren’t investing in the Roth ahead of the traditional. I like the flexibility of the Roth better.

By: Andrew Stevens

Andrew Stevens — Wed, 26 Sep 2007 09:39:06 +0000

Mapgirl, are you saying that you’ve already contributed to an IRA earlier this year? If so, you can probably “recharacterize” the contributions as a Roth IRA. Even if the funds are commingled with prior year contributions to a traditional IRA, you can do something similar by rolling the IRAs over into a Roth. (I’m not sure if the commingling disallows recharacterization or not.)

Unlike me, who just rolled over my old job’s 401(k) into a Roth earlier this year, your taxes probably won’t be too painful on that rollover since I’m guessing you made the contributions on money that has already had taxes withheld anyway.

I strongly advise almost anyone who meets the income test to contribute to Roths if possible. It’s true that you don’t get the tax deduction now, but the long-term benefits of tax-free earnings are worth it. You’ll thank yourself in thirty years (or your heirs will - they too get tax-free withdrawals if you don’t live to spend it yourself). I’m going to miss the Roth a great deal once I no longer qualify.

By: Mrs. Micah

Mrs. Micah — Tue, 25 Sep 2007 23:07:34 +0000

I’m not an expert, but I think IRAs can be rolled over into Roths. They just can’t roll back.

By: mapgirl

mapgirl — Tue, 25 Sep 2007 20:08:21 +0000

Bri - Yes, if your AGI is going over $52K this year, it sounds like your contributions will not be deductible. But make sure you check your AGI. Your 401K contributions should not be included in that number. It helps to have a copy of a 1040 tax form in front of you to understand the AGI.

By: Bri

Bri — Tue, 25 Sep 2007 17:13:01 +0000

Now I’m thoroughly confused. I switched jobs half way through the year and won’t be eligible for my new 401(k) until 2008. But I did participate in my previous employer’s 401(k) until June. I thought I was being smart and opened up an IRA, putting contributions that would have been going to a 401(k) in there every paycheck. But are these contributions now NON-tax deductible? Does it matter that I can’t contribute to a 401(k) now but I could previously? Or am I hosed because of the old 401(k)? My AGI is about 57K.

By: SJean

SJean — Tue, 25 Sep 2007 14:46:40 +0000

Perhaps you could roll your traditional IRA into a Roth? I am not sure if tha is the best approach, but something to look into.

There are income limits for Roths, but it is about 99k… If you are over that, great work! =)

By: Sistah Ant

Sistah Ant — Tue, 25 Sep 2007 14:45:31 +0000

Is this what I have to look forward to? Constantly having to read and keep up with tax laws and deferred compensation guidelines, and rising income making my finances more complicated? Sheesh.

Have fun opening that Roth!