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Question for the Money Doctors

Question submitted on Jan 31, 2014.

Question

I opened a Roth Ira 10 years ago. Now making over 160,000. Getting taxed for what I put in during 2013. Do I have to close this account since I cannot roll it over into An Ira. What do you recommend since I will get a penalty for closing it?

Answer

Your current income has nothing to do with an existing Roth IRA. Your income level only affects contributions made for the current year. If you are single, then you are over the amount of income that you are eligible to contribute to a Roth IRA. If you did, you can contact your IRA administrator and ask them to move it to Traditional IRA. It would also not be deductible (assuming you are participating in your employer''s 401(k) plan), but the earnings will grow tax deferred. Still not a bad deal.

You can also remove the Roth IRA contribution and there should be no penalties, only taxes on the income portion of the distribution.

You can go to http://www.irs.gov/Retirement-Plans/Roth-IRAs and get a copy of Publication 590, Individual Retirement Accounts (http://www.irs.gov/publications/p590/ch02.html) to get more information.


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