What if we exceed the AGI amount?

[Guest lisa9wong]

What if my husband and I exceed the income amount ($150k-160k) within the next few years? Does that mean that we can no longer contribute to a roth IRA? Thanks to anyone who can shed some light to this.

[BPickerCPA]

In any year your AGI exceeds the limit, you cannot contribute to the Roth for that year. Each year stands on its own, so if you do NOT exceed the limit in a following year, you can again contribute to the Roth.

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Barry Picker, CPA/PFS, CFP

New York, NY

[Guest lisa9wong]

Thanks for the quick and helpful response! Would it still be worth it for us to even start one then? If we can only contribute to it for a few years?

[BPickerCPA]

Basically that's a personal decision. But keep in mind that the law can always be changed to raise either the maximum contribution, the income limits, or both.

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Barry Picker, CPA/PFS, CFP

New York, NY

[John G]

Would it be worthwhile? I guess you may be thinking about (1) how much bother to have a Roth, and (2) value of a Roth.

On the first point, both you and your husband would qualify so we are really talking about two Roths. Probably the simplest way to do this is to find a low cost mutual fund, fill out a one page form and attach a check. You can use the March issue of Consumer Reports (or any Money, Worth or Kiplinger) to find a custodian and call for documents. Or you can use the web. Two hours to search, select and contact. One hour to fill out the forms and mail. While this is only one approach, it is probably involves the least amount of time.

Second issue, Roths can accumulate an amazing amount of assets if invested wisely and given a lot of time. So if you are young, the tax free compounding is more valuable. For example, $2000 x 2 invested at age 30 might growth to $128,000 at age 65 if your investments average a 10% annual return. A second benefit of the Roth is that there are not required distributions. Some couples also use the Roth as an estate planning option.

You did not indicate your other retirement/investment options. You certainly want to participate in any corporate matching programs such as an ESOP, thrift, 403B or 401k plan. If you have additional funds to invest, a Roth might be the next choice. Remember, you can fund a Roth for both 1999 and 2000 right now, so if you qualify you might be starting with $8,000 (2yrs x 2 people x 2000). Good luck.