What must I do if I open a Roth IRA while UNDER the 160,000 salary cap (married, filing jointly) and then later go over this limit?

[Guest chauntie]

At this point, my wife and I are under the "salary cap" for contributing to a Roth IRA, and we both are actively contributing to our accounts. What must we do with our existing accounts if our incomes exceed this value in the future, and we are no longer eligible to contribute? Do we need to somehow convert these accounts, or are we allowed to have them, just not to make any further contributions?

Thanks!

[Appleby]

If your modified adjusted gross income exceeds the limit for the year you contribute to your Roth IRA, you may recharacterize the contribution to your traditional IRA. A recharacterization for a 2003 contribution may be completed by October 15,2004. If you choose to recharacterize the contribution, talk to your IRA custodian about documentation requirement and applicable procedures.

If you prefer not to contribute to a traditional IRA, you must remove the contribution as a ‘return of excess’ from the Roth IRA in order to avoild penalties. The deadline for removing an excess contribution for 2003 is also October 15,2004.