Who Can Have a Roth IRA?
I have a retirement plan at work but also want to open a Roth IRA. Can I?
You can have both a retirement plan at work—such as a 457 or a 401(a)—and an IRA. But whether you qualify for a Roth depends on your income. In 2009, you can contribute up to $5,000 to a Roth IRA (or $6,000 if 50 or older) if your modified adjusted gross income is less than $105,000 if single, or $166,000 if married filing jointly. The contribution amount is gradually phased out until your income reaches $120,000 if single, or $176,000 if married filing jointly. You generally need earned income to contribute to a Roth, but if you’re married and don’t work outside the home, your working spouse can contribute to a Roth IRA for you.
Roth contributions are not tax-deductible, but you may get the big benefit later: After you reach age 59½, you can withdraw the money from the Roth tax-free, as long as you’ve had a Roth for at least five years. And you can withdraw your contributions from the Roth at any time, and for any reason, without any penalties or taxes.
Even if you earn too much to qualify for a Roth IRA now, you will be able to get in soon. Under the current law, you can convert your traditional IRA to a Roth only if your modified adjusted gross income is less than $100,000 (whether married or single). But that income limit disappears in 2010. Once it’s gone, those with income too high for a Roth contribution can make non-deductible contributions to a traditional IRA…and then convert the account to a Roth IRA. You’ll have to pay taxes on the rollover, except for any portion that was from non-deductible IRA contributions (based on the ratio of non-deductible pay-ins to the total amount of all of your IRAs). See IRS Publication 590 for details.