Comments on: 2010 Traditional and Roth IRA Contribution Limits http://cashmoneylife.com/2009/10/19/2010-traditional-roth-ira-contribution-limits/ Money Management, Small Business, Career Fri, 19 Mar 2010 22:04:10 +0000 http://wordpress.org/?v=2.9.2 hourly 1 By: Ryan http://cashmoneylife.com/2009/10/19/2010-traditional-roth-ira-contribution-limits/comment-page-1/#comment-22363 Ryan Wed, 17 Mar 2010 18:28:34 +0000 http://cashmoneylife.com/?p=1909#comment-22363 li, Yes, you can make a non-deductible Traditional IRA contribution, then roll it into a Roth IRA. If you do the Roth conversion before your non-deductible IRA earns any income then you won't owe any taxes on the rollover. I recommend speaking with your brokerage firm or a financial/tax advisor for more details about the rollover and potential tax issues. li, Yes, you can make a non-deductible Traditional IRA contribution, then roll it into a Roth IRA. If you do the Roth conversion before your non-deductible IRA earns any income then you won’t owe any taxes on the rollover. I recommend speaking with your brokerage firm or a financial/tax advisor for more details about the rollover and potential tax issues.

]]> By: li http://cashmoneylife.com/2009/10/19/2010-traditional-roth-ira-contribution-limits/comment-page-1/#comment-22361 li Wed, 17 Mar 2010 17:31:57 +0000 http://cashmoneylife.com/?p=1909#comment-22361 our MAGI is above the limit ($176000), is it ok to make non-deductible $5000 (each) contribution to traditional IRA for 2010, and then immediately convert them to Roth IRA? Could we use this back door strategy? Do you recommend we open a new roth ira accounts for the conversion or just convert to existing roth ira accounts? our MAGI is above the limit ($176000), is it ok to make non-deductible $5000 (each) contribution to traditional IRA for 2010, and then immediately convert them to Roth IRA? Could we use this back door strategy?

Do you recommend we open a new roth ira accounts for the conversion or just convert to existing roth ira accounts?

]]> By: fredct http://cashmoneylife.com/2009/10/19/2010-traditional-roth-ira-contribution-limits/comment-page-1/#comment-22294 fredct Sat, 13 Mar 2010 17:29:07 +0000 http://cashmoneylife.com/?p=1909#comment-22294 Ron, Your hunch is correct, and Ryan's response is as well. Here's the link to publication 590 that explains it: http://www.irs.gov/publications/p590/ch01.html#en_US_publink1000230812 Key quote: "Partly taxable. If you made nondeductible contributions or rolled over any after-tax amounts to any of your traditional IRAs, you have a cost basis (investment in the contract) equal to the amount of those contributions. These nondeductible contributions are not taxed when they are distributed to you. They are a return of your investment in your IRA. " Ron,

Your hunch is correct, and Ryan’s response is as well.

Here’s the link to publication 590 that explains it:
http://www.irs.gov/publications/p590/ch01.html#en_US_publink1000230812

Key quote:
“Partly taxable. If you made nondeductible contributions or rolled over any after-tax amounts to any of your traditional IRAs, you have a cost basis (investment in the contract) equal to the amount of those contributions. These nondeductible contributions are not taxed when they are distributed to you. They are a return of your investment in your IRA. “

]]> By: Ryan http://cashmoneylife.com/2009/10/19/2010-traditional-roth-ira-contribution-limits/comment-page-1/#comment-22292 Ryan Sat, 13 Mar 2010 15:08:08 +0000 http://cashmoneylife.com/?p=1909#comment-22292 Ron, based on my understanding, no, you wouldn't have to pay taxes on the non-deductible Traditional IRA contributions themselves, but yes, you would have to pay taxes on any appreciation. Ron, based on my understanding, no, you wouldn’t have to pay taxes on the non-deductible Traditional IRA contributions themselves, but yes, you would have to pay taxes on any appreciation.

]]> By: Ron http://cashmoneylife.com/2009/10/19/2010-traditional-roth-ira-contribution-limits/comment-page-1/#comment-22285 Ron Fri, 12 Mar 2010 20:55:35 +0000 http://cashmoneylife.com/?p=1909#comment-22285 I made contributions to a traditional IRA for many years that were not deductible because of the income limits. If I transfer those funds to a Roth IRA, do I have to pay taxes on them again? I assume you have to pay taxes on any appreciation, but do I have to pay taxes on the principle? I made contributions to a traditional IRA for many years that were not deductible because of the income limits. If I transfer those funds to a Roth IRA, do I have to pay taxes on them again? I assume you have to pay taxes on any appreciation, but do I have to pay taxes on the principle?

]]> By: Ryan http://cashmoneylife.com/2009/10/19/2010-traditional-roth-ira-contribution-limits/comment-page-1/#comment-22014 Ryan Sun, 28 Feb 2010 01:52:29 +0000 http://cashmoneylife.com/?p=1909#comment-22014 Susan, your contributions can remain in the Traditional IRA, however, they will not count as a tax deduction for this year. You may be able to recharacterize your contributions as a Roth IRA, however, you wouldn't get a tax deduction for the year. I recommend speaking with your IRA custodian or a tax professional for more information about your options and how to handle the paperwork. I hope it goes well! Susan, your contributions can remain in the Traditional IRA, however, they will not count as a tax deduction for this year. You may be able to recharacterize your contributions as a Roth IRA, however, you wouldn’t get a tax deduction for the year. I recommend speaking with your IRA custodian or a tax professional for more information about your options and how to handle the paperwork. I hope it goes well!

]]> By: Susan http://cashmoneylife.com/2009/10/19/2010-traditional-roth-ira-contribution-limits/comment-page-1/#comment-22011 Susan Sat, 27 Feb 2010 17:30:50 +0000 http://cashmoneylife.com/?p=1909#comment-22011 Ryan, I'm reading the Trad. IRA guidelines, above, which state: "The phase out range for married filing jointly is between $89,000 and $109,000." We just figured out that our MAGI is a hair over $109K for 2009 and I'd contributed as normal to my IRA! YIKES. What happens now? This is hard since I only work part time and the only retirement I have for "just me" is my IRA. What is a homemaker with part time work to do for personal retirement savings? Thanks for your help. Ryan,
I’m reading the Trad. IRA guidelines, above, which state:
“The phase out range for married filing jointly is between $89,000 and $109,000.”
We just figured out that our MAGI is a hair over $109K for 2009 and I’d contributed as normal to my IRA! YIKES. What happens now?
This is hard since I only work part time and the only retirement I have for “just me” is my IRA. What is a homemaker with part time work to do for personal retirement savings?
Thanks for your help.

]]> By: Ryan http://cashmoneylife.com/2009/10/19/2010-traditional-roth-ira-contribution-limits/comment-page-1/#comment-21402 Ryan Mon, 25 Jan 2010 18:36:18 +0000 http://cashmoneylife.com/?p=1909#comment-21402 Craig, this has been a topic of contention with many people for a long time. While many people think that $120,000 is a lot of money (and it is), the buying power of that money is significantly affected by location and many other factors. However, there are other investments you can make that can help you know or in the future. As Fred mentioned, there are still investment opportunities, even if you can't participate in the Roth IRA. Craig, this has been a topic of contention with many people for a long time. While many people think that $120,000 is a lot of money (and it is), the buying power of that money is significantly affected by location and many other factors. However, there are other investments you can make that can help you know or in the future. As Fred mentioned, there are still investment opportunities, even if you can’t participate in the Roth IRA.

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