Few questions regarding Roth IRAs

[Guest medar]

I am 30 and my wife is 29. We both work, and both contribute the max to our 401k that our employer will match (ie - mine matches 1/2 up to 6% - so I contribute 6%, they match 3%). I plan on continuing matching whatever they will contribute...so will not change that.

I would also like to start a Roth IRA, but am not completely familiar with them, and was hoping to get a few quick questions answered, easy ones for those in-the-know!

1. What is the combined family max income before you cannot open a Roth? Let's assume both my wife and I make $60k each ($120k total) - are we eligible?

2. Where do you open a Roth IRA? Local bank...brokerage...etc? We have Scottrade and Ameritrade accounts...and standard checking/savings account.

Depending on what else I can read in these forums...I may find some other questions. Great boards here!

Thanks in advance.

[John G]

Answers:

1. If your combined modified adjusted gross income (salaries plus other income sources like interest and dividends) is around $120K and you are married filling a joint return, then you both qualify for a Roth IRA. If your modified adjusted gross income is between 150k and 160k and you are filing a joint return then you are in the "phase out" zone. Above 160k you can not contribute (in that year) to a Roth. Eligibility is determined each year, contributions made in a year when you are eligible are not affected by a subsequent change in eligibility.

2. IRAs are maintained by a custodial institution. The most common custodians are banks, mutual funds or fund families and brokerages. The choice is often influenced by convenience, type of investment you plan to make and annual fees (which can be zero). If after opening a Roth account, you decide you want a different custodian, you can then do a custodian to custodian transfer. Scottrade and Ameritrade both support IRA accounts.

You can learn more about Roth IRAs at this message board and also the www.rothira.com web site.