Am I just plain screwed out of retirement?

**TBH** · 03-15-2009, 08:12 AM

The amount you can save in tax sheltered accounts may be limited, but the amount you can save for your retirement is not limited. You just have to save post-tax money. I think most people who have high incomes and save adequately to replace those incomes have to save outside tax-sheltered accounts. I'm not saying it's right, but that's the way it is.

If you're self employed, have you looked into opening a SEP-IRA or some other self-employed retirement plan? I have had a workplace retirement account and a Roth IRA forever, but my self-employed income has gone up a lot recently and I'm getting hammered by taxes, so I am going to start saving in the SEP-IRA instead of the Roth. Contribution limits are pretty high, but I'm not sure what the income limits are.

**Phatphoeater** · 03-15-2009, 08:28 AM

I don't think there is an income limit to the SEP-IRA. I have one as well. There is a semi-complicated formula but basically you can contribute up to 20% of your gross SE income minus SE tax I believe. The IRS has a downloadable booklet here wwwdotirs.gov/pub/irs-pdf/p560.pdf

**noppenbd** · 03-15-2009, 09:31 AM

Originally posted by KTP View Post

If my wife's MAGI is above 170,000 and I am self employed with a very small income, it looks like I can't contribute to a Roth or a deductable IRA. So the government is telling me I don't deserve a retirement? Or do they just expect us to live off my wife's 16,500 limit 401k?

Contribute $10K to a nondeductible IRA this year ($5K each for you and your wife) and convert it to a Roth in 2010 when the income limits on Roth conversions are scheduled to go away. It's almost the same thing as contributing to a Roth directly.

The catch is if you have existing traditional IRAs you can't just convert the nondeductible portion, the IRS considers any conversion as part pre-tax and part after-tax.

**KTP** · 03-15-2009, 09:36 AM

Oh! the income limits are going away on Roth contributions? FINALLY. They realized how unfair it was for someone living in CA making just over the lmiit to be unable to contribute to a Roth vs someone living in south GA making just under the limit and otherwise living exactly the same. (I cite this situation because it is happening in my family).

To be honest, not allowing middle and high middle, or even rich incomes to contribute to a Roth was totally unfair. It is a retirement vehicle from funds the government has already taxed. Why it would have any income limit was beyond my understanding.

**maat55** · 03-15-2009, 10:37 AM

Originally posted by KTP View Post

If my wife's MAGI is above 170,000 and I am self employed with a very small income, it looks like I can't contribute to a Roth or a deductable IRA. So the government is telling me I don't deserve a retirement? Or do they just expect us to live off my wife's 16,500 limit 401k?

You are free to invest in taxable investments. I must say, though I am anti big government and taxes, I don't feel sorry for you. You should retire well if you invest, taxed or not.

**noppenbd** · 03-15-2009, 10:43 AM

Originally posted by KTP View Post

Oh! the income limits are going away on Roth contributions?

No. For some reason there will still be an income limit on Roth contributions. But the income limit on Roth conversions is going away.

To get around the limit on contributions, contribute to a nondeductible traditional IRA this year and next, then convert the nondeductible IRA to a Roth IRA in 2010.

Of course this whole process makes no sense and it would be a lot easier if Congress just eliminated the income limit on contributions.

Am I just plain screwed out of retirement?