What happens to Roth IRAs after exceeding MAGI limits?

[Guest dbretzmann]

What happens to Roth IRAs after exceeding MAGI limits? For example, a person does not currently exceed the limit to open or contribute to a Roth so they contribute the max $2000 for three years. Then, in the fourth year, they get a big raise which pushes them over the MAGI limit and cannot contribute anymore. What happens to the $6000 (plus gains or minus losses)? Can it sit in the Roth until the person wants to take a distribution or must it be rolled over to a traditional IRA?

[Michael Devault]

The modified adjusted gross income ("MAGI") limit is used to determine current year contributions only. If your MAGI exceeds the limit this year, you can't contribute.

However, it doesn't affect contributions made in past years. Those contributions may continue to remain in the Roth IRA.

Hope this helps.

[Guest dbretzmann]

Thanks for the info. That's what I figured but I'm pretty new to this game and have a couple guys at work telling me that the Roth would have to be rolled into a traditional IRA. Thanks for clearing this up.