Make too much

[Guest azrph]

I have a probably extremely naive question, but cannot find the answer. Say this year I contribute the max $$ to a ROth IRA becuase I am at AGI $95,000...right at cut off as single filer. In a year or 2 when my income goes up and exceeds the AGI the IRS allows for the year. Say for example, in 2006 I am making $130,000 and by law not allow mre than $115,000 AGI for single filers. I have some money in the ROTH IRA from previous years, I now have to make the money i already have in the ROth work becuase I am dead in the water for contributing any more. Is this correct? So I can screw around with the money I aleady have in there when my salary was not as high...allowing me to contribute and open a Roth IRa, but cannot contribute more to it at that point since i am making so much?

2nd question, I know there are tax consequences on this but I can roll a 401k into a traditional IRA then a ROth. My question is the contribution limits. FOr example say I have $10k in my 401k, roll to traditional, then roll into a Roth. SInce the ma yearly allowed is $4000, do I take distribution on the other $6k? Or am I allowed to roth all 10k into it and pay taxes on it?

Thanks for the help

[GBurns]

Whether you never ever contribute any more money to your Roth or any other plan is irrelevant. As long as you have money in an account whether Roth, 401(k), or cash under the mattress, you should be making it work for you earning interest, dividends or whatever.

What were you doing with the money that you had contributed to the Roth in the past?

Have you asked your Roth custodian or the investment vehicle, these questions? That should have been your first port of call to see what they have as contribution limits and rollover restrictions.

[John G]

Contributions can only be made if you meet the income qualification in the year of the contribution. Once put into the Roth account, there is not further qualification for those assets. However, new contributions must each year be supported by income and tax filing status qualifications.

As prior author said: yes, you "deploy" the funds in some kind of investment, stocks, bonds, money market and mutual funds are the primary choices. The whole point is to grow these assets to stay ahead of inflation and to meet your objectives.

[Appleby]

Just to add to the other posts/responses

I have a probably extremely naive question, but cannot find the answer. Say this year I contribute the max $$ to a ROth IRA becuase I am at AGI $95,000...right at cut off as single filer. In a year or 2 when my income goes up and exceeds the AGI the IRS allows for the year. Say for example, in 2006 I am making $130,000 and by law not allow mre than $115,000 AGI for single filers. I have some money in the ROTH IRA from previous years, I now have to make the money  i already have in the ROth work becuase I am dead in the water for contributing any more. Is this correct? So I can screw around with the money I aleady have in there when my salary was not as high...allowing me to contribute and open a Roth IRa, but cannot contribute more to it at that point since i am making so much?

Yes- as indicated in the other responses

2nd question, I know there are tax consequences on this but I can roll a 401k into a traditional IRA then a ROth. My question is the contribution limits. FOr example say I have $10k in my 401k, roll to traditional, then  roll into a Roth. SInce the ma yearly allowed is $4000, do I take distribution on the other $6k? Or am I allowed to roth all 10k into it and pay taxes on it? 

This trasnaction you refer to ( moving the assets from the 401(k) to the Traditional IRA then to the Roth IRA is referred to as a Roth Conversion . The income limit for this a a MAGI of $100,000. There is no dollar limit as to the amount you can move, therefore if your MAGI for the year you do this is $100,000 or less, it would be OK...