When Your Income is Too High for Roth

Roth IRAs are nice ways to feather your retirement nest, but there are limits to how much you can contribute annually. Simply put the more you make the less you may be able to contribute. 

 It goes like this:

Filing Status  Full Contribution  Reduced Contribution
 Single /Head of Household  Up to $105,000  $105,001 to $120,000
 Married Filing Jointly  Up to $167,000  $167,001 to $177,000


If you make more than the maximum ($120,000—single filers, $177,000—joint filers) you cannot contribute.  However, there are ways to reduce your MAGI and qualify to put money in your Roth. 

First, look at your 401(k).  This should always be your first stop for building future wealth anyway since it is pre-tax dollars. (That and your employer may provide matching funds—free money!!) Increasing your 401(k) contribution may lower your MAGI and set you in the playing field for contributing to your Roth.

Next, look at your investments. Is there something that’s dragging your portfolio down? Sell it. Don’t wait for it to pick up. You can sell at a loss and let capital losses offset your capital gains. Your losses can offset up to $3,000 of ordinary income.

Also, take a look at health insurance. If you have an insurance policy with a deductible of at least $1,200 for a single person, or $2,400 for a family, you can open and contribute to a health savings plan. If your employer offers an HSA, you may be able to contribute pre-tax dollars (again, reducing your MAGI). Otherwise, your contributions to the HSA are tax-deductible—also lowering your income.

For more ideas on keeping more of your money while building future wealth contact the Coors Credit Union Investment and Retirement Center.


Post a Comment

Required fields are marked *


%d bloggers like this: