Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
What to do about income reaching Roth income limits?
Old 02-22-2017, 03:46 PM   #1
Dryer sheet wannabe
 
Join Date: Jan 2012
Posts: 15
What to do about income reaching Roth income limits?

It's a good problem to have I guess. G/f has recently taken a new job that has an income that is above the Roth income limit. She has already contributed $846.08 to her Roth account. Her salary is set at 120k and she will bonus approx. another 8k. I'm not sure exactly what to do here.

At first I thought we should just keep contributing to Roth to see where she ends up for income at the end of the year and then recharacterize her contributions to Trad IRA and then backdoor Roth. Now I'm thinking that we should just start contributing to the Trad(after tax) and then backdoor Roth before 2017 taxes. Recently just read some info about how having an existing Trad IRA might cause some issues due to already having a "sizeable" amount accumulated from past companies' rollovers. So I'm a little lost and I'd rather get my advice here before I call up a Vanguard specialist as I trust the advice here more based on the experiences I've had so far with Vanguard.

Here are the numbers:

120k salary w/ good potential of another 8k in bonuses

$102,841 currently in Trad IRA from past rollovers

$846.08 currently contributed so far for '17

From what I understand there is a phase-out period between 118-133k for Roth but not sure how the total amount allowed to contribute is calculated. I want to do it the easiest way possible that will not expose any of the prior Trad IRA to taxes or have to pay any sort of penalty for contributing to Roth while above the income limits. Sorry but the explanations online were not clear to me to easily understand what our best option is.

Thank you.
__________________

surf n turf is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

What to do about income reaching Roth income limits?
Old 02-22-2017, 03:53 PM   #2
Full time employment: Posting here.
Al in Ohio's Avatar
 
Join Date: Jun 2013
Location: Columbus
Posts: 757
What to do about income reaching Roth income limits?

I use to make about that income. When I worked I maxed out my company monthly 401k amount (or you could do the same with Trad IRA) to over 20-24% whatever max was allowed. This lowers your AGI and allows you to then max out your ROTH to the full amount. YMMV
__________________

__________________
Ohio INTJ ENG ER as of 2016
Al in Ohio is offline   Reply With Quote
Old 02-22-2017, 03:54 PM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Big_Hitter's Avatar
 
Join Date: May 2013
Location: In the fairway
Posts: 5,231
if you got married would that change the threshold?
__________________
Swing hard, look up
Big_Hitter is offline   Reply With Quote
Old 02-22-2017, 03:56 PM   #4
Thinks s/he gets paid by the post
exnavynuke's Avatar
 
Join Date: Sep 2016
Location: Acworth
Posts: 1,175
Quote:
Originally Posted by Al in Ohio View Post
I use to make about that income. When I worked I maxed out my company monthly 401k amount (or you could do the same with Trad IRA to over 20-24% whatever max was allowed. This lowers your AGI and allows you to then max out your ROTH to the full amount. YMMV
This seems like the easiest solution if available.
exnavynuke is online now   Reply With Quote
Old 02-22-2017, 04:22 PM   #5
Dryer sheet wannabe
 
Join Date: Jan 2012
Posts: 15
Quote:
Originally Posted by Al in Ohio View Post
I use to make about that income. When I worked I maxed out my company monthly 401k amount (or you could do the same with Trad IRA) to over 20-24% whatever max was allowed. This lowers your AGI and allows you to then max out your ROTH to the full amount. YMMV
Oh...I feel dumb and happy all at once. I always thought that 401k contributions only affected your taxable income and not your AGI or MAGI. I did a search awhile back to see how MAGI/AGI was calculated and NO WHERE did it say anything about 401k contributions. So yeah, I'm happy as she contributes the full 18k/yr into her company 401k as well as another 1k/mo into a taxable account. The only thing we needed to get in order was her Roth(with her new income level), which up until now, I thought we would end up having to jump through hoops to keep contributing to.

I just did, and should have done earlier, a search for whether 401k contributions reduce AGI/MAGI.

Thanks for the simple verification.
surf n turf is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Questions about limits surrounding ROTH IRA, SEP IRA and ROTH 401k RockSplat FIRE and Money 14 06-08-2009 01:30 PM
Roth IRA Income limits podey Young Dreamers 4 12-14-2007 05:33 PM
Why are Roth IRA income limits less than half for married couples? soupcxan FIRE and Money 7 09-17-2007 08:14 PM
Minimum limits - Roth teejayevans FIRE and Money 6 05-31-2007 06:56 PM
401k/IRA/Roth limits? Bimmerbill Young Dreamers 17 09-29-2006 12:43 AM

» Quick Links

 
All times are GMT -6. The time now is 10:32 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2019, vBulletin Solutions, Inc.
×