Roth eligibility question--new job

[Guest jrein]

Hello, I changed jobs halfway through this year and am not eligible to contribute to a 401(k) until next January. I did contribute in my prior job (through June). how much can I put into my preexisting roth for 2000? I will make about $100,000 this year. Also, can I open a new Roth (that one has high fees), or am I now making too much money? Can I also start a regular IRA, or is there one limit on such contributions? thanks, Jrein

[Michael Devault]

Your ability to contribute to a Roth IRA is not conditioned on participation in an employer sponsored retirement plan, such as a 401(k). It is, however, conditioned on your AGI and your filing status. If you are married and file a joint return, you can contribute if your AGI is below $150,000. You can make a reduced contribution if your AGI is between $150,000 and $160,000.

If you're single or filing as head of household, the AGI numbers reduce to $95,000 for a full contribution, which is reduced for AGI between $95,000 & $110,000.

You can contribute to a traditional IRA, but your income is such that you won't be able to deduct the contribution, so there's not much advantage to doing so. Also, your total contributions to a Roth IRA plus a traditional IRA cannot exceed $2,000.

As far as making too much money, feel free to send me any excess you may have!

Hope this helps.

[Guest jrein]

michael, thanks so much. so how much can i contribute, then, with that salary?

[Michael Devault]

If your total income for the year will be $100,000, you will quite likely be able to contribute $2,000 to a Roth IRA. However, as I mentioned in my previous post, it depends on your filing status and your AGI.

Take a look at IRS Publication 590 (available on the IRS' web site) for complete details.

[John G]

Watch for possible changes in the income thresholds and maximum contributions allowed, I suspect you will see some legislative changes in the next couple of years.

While Senator Roth lost his election in Delaware, the IRA issue is likely to keep coming up. The $2000 contribution ceiling has been around since you could buy a coke for a dime. An adjustment seems long overdue. One previous proposal would be to increase the ceiling after age 50 or 55.

Assuming you actually can determine in light of the recent vote who are your reps in Congress, you may want to send them a short note expressing an interest in relaxing some of the IRA rules. The folks in Florida might get a speedy response, since every vote in the Sunshine state seems important!