roth ira income rules
client age 44 income of $97,000, married with spouse (age 38) income of $65,000
can they start a Roth IRA??? only have a pension at work now. and a small 403b with a $50 monthly deposit into that account.
??? can they both start a roth and what are the limits?
Permalink Submitted by Alan Spross on Thu, 2007-09-13 22:26
They are possibly in the phaseout range. For 2007, joint filers reach the threshold where Roth contributions begin phaseout at 156,000 of modified AGI. Therefore, they must determine what their MAGI actually is. Contributions to a 403b or 401k reduce MAGI and could bring the income down. The phaseout range begins at 156,000 and at 166,000 no Roth contribution for either spouse is allowed. Within the range, there is a chart in Pub 590 to calculate the partial contribution allowed. Basically, it a pro rated adjustment, ie 161,000 would permit a Roth contribution of about half the regular 4,000 each (or 2,000 each).
If they are indeed in the phaseout range, they might as well wait until their tax return has been prepared, and then determine the exact amount allowed and contribute it then. Otherwise, they get into the mess of correcting excess contributions and having the earnings that are taxable increase the MAGI again and create another calculation. It’s not worth the trouble.