Roth IRA - What happens if I start making more than $109,999 a year

[Guest ENDER]

Suppose I have been building up a Roth IRA for several years. When I started the Roth I was single and my modified adjusted gross income (MAGI) was $50,000 a year. Thus, I was elegible to start a Roth. However, my new MAGI is now $120,000. According to Roth IRA rules I can no longer make contributions to a Roth IRA. My question is, then, what happens to the money that I built up in the Roth? Do I have to take it out or can I leave it in the Roth to continue to grow? And if my MAGI lowers back down below $110,000 can I go back to making contributions into that Roth?

[david rigby]

Roth IRA - What happens if I start making more than $109,999 a year

Cry all the way to the bank?

[Bird]

You leave it there and simply cannot contribute if your income is too high.

[John G]

Money already contributed to the Roth qualified under your circumstances in a prior year and has nothing to do with your current status (which is good!). You can still switch custodians, make investment choices, etc. Just ignor you current failure to qualify and operate your Roth normally.

But, you can't contribute right now.

But...

1. Marry someone who doesn't throw you over the top.

2. Defer income to the following year (like bonuses).

3. Hope Congress expands the program.

4. VERY IMPORTANT - consider other options you do have like 401k, 403b, pension profitsharing, ESOP, etc. If you are employed, look to max out on anythig your company offers especially if they match any contributions from you. If you own your own business you have many more choices. If you start a business on the side, some of these may come into play. You may want to talk to your accountant or tax advisor about these.

5. EQUALLY IMPORTANT - you can also invest the old fashioned way by opening a brokerage account or starting a taxable mutual fund. With long term capital gains at 15%, you can invest with little governmental skim. If you buy and hold a long long time, you defer the taxes until you finally sell (except for dividends) which if pretty good.

If your MAGI drops down again, you can contribute. Eligibility to CONTRIBUTE is done on a year by year basis. Eligibility to own a Roth continues from all the times when you qualified, one qualified you are not disqualified regardless of subsequent income or assets.

Congratulations on moving up.

[Guest ENDER]

Thank you very much John. Your response has cleared up my questions nicely. I wish you the best.