What You Must Know About The Roth IRA Contribution Phase OutIf you are opening a Roth IRA or you currently have one in place, then there are some facts that you need to know about the Roth IRA contribution phase out. The contributions you deposit into your Roth account depends on what your income level is. If it fluctuates and goes above certain levels, the amount you put into your Roth IRA will either be reduced or even eliminated. What this means is that you can go ahead and deposit the allowed amount to your Roth IRA (the same amount as a traditional IRA). But, with a Roth IRA the amount you put in is phased out when you reach certain income levels. High-income individuals could have their Roth contribution reduced to nothing depending on what their income is for the year they are contributing. It’s a simple concept really. Look at what your modified adjusted gross income is when you are paying your taxes for the year. The Roth IRA deduction is adjusted each year for inflation and your IRS filing status directly affects the level where the Roth IRA reduction will occur. Here is a brief definition of the 2008 rules that apply to Roth IRA’s. • Single – Your Roth contribution limit is reduced when your modified adjusted gross income exceeds $101,000.00 and is eliminated completely when it reaches $116.000.00 As you can see, you need to pay attention to the Roth IRA contribution phase out as it applies to your particular circumstances. There are a couple of last tidbits of information that you should know about your Roth IRA. If your contribution limit doesn’t result in an even $10 increment, it is rounded up to the next $10 increment. Finally, your limit is not reduced below $200 until your modified adjusted gross income reaches the elimination level applicable to you. Knowing the phase out rules that apply to Roth IRA’s is important before you make a final decision on your IRA investment. Take the time to evaluation your financial situation and then decide if you are in the position to invest in a Roth. If you are and the phase-out rules are in your favor, then become one of the millions of American investors who are pleased with their decision. |