27 year old newly weds looking for advice

[noppenbd]

I am curious why you do not qualify for the Roth. If you are contributing 15500 to your 401k this year, you would need to have total income of $174500 to be disqualified for the Roth ($174500-15500=AGI of $159000) if you are married filing jointly. I don't see how you are near this unless I am missing something in your income.

[jIM_Ohio]

Originally Posted by noppenbd

I am curious why you do not qualify for the Roth. If you are contributing 15500 to your 401k this year, you would need to have total income of $174500 to be disqualified for the Roth ($174500-15500=AGI of $159000) if you are married filing jointly. I don't see how you are near this unless I am missing something in your income.

He said he does not qualify under current laws. Maybe the income is not the part which he is looking at?
Publication 590 (2007), Individual Retirement Arrangements (IRAs)

Maybe s(he) cannot file as married, so max for single person is 114k. Just a guess.

[noppenbd]

Even filing single, a partial Roth contribution can be made up to AGI of $114K. With $15500 of 401k, that would be $129K gross. He should be able to do some Roth at least.

[tripods68]

Is there a penalty for excessive ROTH IRA contributions if you hit or exceeded the income limitation? If so, how do I resolve this?

[boosami]

You have to withdraw the excess or be subject to a 6% penalty.

[tripods68]

What is that income limit contributions for ROTH and IRA Traditional?

[boosami]

It depends on a few different factors... If your filing is individual, joint, or separated, and if you and/or your spouse are already participating in employer-sponsored retirement plan.

[noppenbd]

Roth has an AGI limit, see http://www.irs.gov/pub/irs-pdf/p590.pdf page 60. Traditional IRA does not have a contribution limit based on AGI AFAIK, but contributions may not be tax deductible if your income is too high (see page 13 of pub 590), or if you are covered by a plan at work.

[anonymous_saver]

Roth IRA - Wikipedia, the free encyclopedia

[jIM_Ohio]

Originally Posted by tripods68

Is there a penalty for excessive ROTH IRA contributions if you hit or exceeded the income limitation? If so, how do I resolve this?

Your yearly IRA max is $5000. If you are phased out, you can RECHARACTORIZE the Roth contribution to a traditional IRA contribution with no taxes or penalites.

I have done 1 recharactorization before when I tried to do a conversion and then later I found out I exceeded the income limits to do the conversion.

1 form from T Rowe Price fixed the problem. No additional penalties or taxes.

[jIM_Ohio]

Originally Posted by boosami

You have to withdraw the excess or be subject to a 6% penalty.

This is a contribution in excess of $5000. If a person was phased out, they can take the over contribution and recharactorize it before filing taxes.

[tripods68]

ROTH Modified limit is $166K for Married Filing Jointly.

So we are ok

[rizzmo]

noppenbd you are correct we are under the AGI limit. My wife has been getting busier at work and may start working full time, she is part time currently. I also already recieved a 3% raise this year that will be retroactively paid from January, and early next year will recieve another 3% raise plus a one time increase of $7,500 per year. I also get a bonus each year between $3,000 - $5,000.