Yet another question about Roth IRA

[tomz]

DW and I never bothered with Roth IRAs because our AGI was always greater than the limits. I plan to retire at the end of this year, but I will be getting some deferred compensation in 2008 that will be around $30k after taxes. Can I create a Roth for DW and one for me and put some of these $$ into separate Roth accounts? If so, how much? We are both over 50 and our earnings in 2008 will be way under the Roth limit.

I put Roth IRA in the search and got 31 pages of results.

Thanks for any help.

 

[REWahoo]

Tomz,

I've found this to be a good source of info on Roth IRAs:

http://www.fairmark.com/rothira/index.htm

 

[Martha]

Setab started another thread with a similar issue.

I am in the same position, but I am trying to decide between a Roth and dumping it into my 401k.

Provided all your income (earned and unearned) does not exceed Roth IRA limits, you and your wife can contribute $5000 each to a Roth in 2007.

 

[tomz]

Thanks for the responses. I wasn't sure if both my spouse and I had to have earned income to setup an account or whether the joint income was sufficient.

A follow on question - do Roth conversions from regular IRAs have any dollar limit? I know I have to pay taxes on funds withdrawn from an IRA, but can I roll over any amount or am I limited to the $5K?

 

[crazy connie]

You can rollover to a Roth any amount you want to pay the taxes on. Most folks do it over years to avoid putting themselves into the higher brackets.

I know that it was suggested you look into the Fairmark Forum and I would also suggest Ed Slotts IRA Forum. It has a wealth of knowledge.

Take care!

 

[Goonie]

Another website I've used for info on Roths is http://www.rothira.com/ .

It has a lot of useful (IMHO) info.

 

[a]

http://www.fairmark.com/rothira/iracomp.htm:

For each year you contribute to a regular IRA or a Roth IRA, you (or your spouse, if you file jointly) must have compensation income. If you don't have compensation income, you can't contribute. And if your compensation income (together with compensation income of your spouse that can be used to support your contribution) is less than the maximum contribution, then the amount you can contribute is reduced.

But the following items don't count as compensation income:

Deferred compensation (payments postponed from a prior year).

--

Will you wife have any earned income after you retire? If not, then neither of you can contribute to a Roth (but can still convert existing IRAs to Roth).

 

[kaneohe]

tomz--it wasn't very clear to me what you were asking in the original post.
I assumed that since you were working during 2007 you would not be eligible for a Roth IRA as in the past.

Were you asking about setting up a Roth(s) in 2008 when your lower income might make you eligible?
I believe that both spouses can set up IRAs even if only one spouse
has taxable compensation (e.g. wages) as long as that compensation is
greater than or equal to the amounts you put in the IRAs (spousal IRA).

Unfortunately I believe that your deferred compensation does not count
as compensation for purposes of an IRA (Refub. 17 p.114 what is
not compensation)

Or were you asking about doing Roth conversions? (you didn't use that word in the original post so it sounded like a different subject that you added later)

 

[tomz]

Thanks for all the replies. I may not have described my situation clearly, but the replies have answered most of my questions.

This is a great board.