Have you wanted to contribute to your Roth IRA but your income limit prevented you?  If you barely missed the cut last year, there is good news.  The IRS was gracious enough to increase the phaseout limits for the Roth IRA for 2009.  Does that excite you? If not, it definitely should.  Before we look at the new phaseout limits, let’s look at the contribution amounts for 2009.

Roth IRA Contribution Still The Same

For 2009, the contribution limits did not increase for the Roth IRA.  You are eligible to contribute $5000 into a Roth IRA, $6000 if you are over the age of 50, including the $1000 catch up contribution. Most likely the limits will increase in 2010, so stay tuned.   Now let’s look at the IRA Phase Out tables:

If this article was helpful, you may also want to check out these posts as well: 7 Things To Know About The 2010 Roth IRA Conversion, 7 Things to Know About Roth IRA for 20092009 401k Contribution Limits Have Increased 7 Questions To Ask Your Financial Planner.

Roth IRA Phaseout Table

Filing Status                                                                     MAGI

Single/Head of Household                         $105,000-$120,000
Married/Jointly                                             $166,000-$176,000
Married/Seperate                                                  $0-$10,000

Don’t Forget About MAGI

First item I want to point out is that we are dealing with Modified Adjusted Gross Income (MAGI) here.  Do not over look that.   In looking at the chart above lets use the Single/Head of Household as our ongoing example and assume that the person is under the age of 50.

Roth IRA Phaseout Examples

Example 1

MAGI is $95,000. This is an easy one.  Contribution allowed is $5000.  Isn’t this simple so far?

Example 2

MAGI is $135,000. Congratulations!  You officially made too much money and cannot take part in a Roth IRA.  Please send your thank you cards compliments to the IRS.  Don’t fret.  You still may be able to contribute to a traditional IRA.  We’ll discuss that later.

Example 3

MAGI is $115,000. This is where it gets a little tricky.  You might want to break out your calculators on this one or just follow these easy steps.

Step 1. Find the amount of the phase for you. In our example, the phase is $15,000. ($120,000-$105,000).

Step 2. Subtract your AGI from the upper amount of the phase. We would use $120,000-$115,000 = $5000.

Step 3. Divide the amount in Step 2 ($5000) by the phase range ($15000) to arrive at .3333 or 33.33%

Step 4. Take 33.33% of the contribution limit of $5000 for a total contribution limit of $1666.67. So $1666.67 is the full amount that a single/head of household under the age of 50 could contribute to their Roth IRA with an MAGI of $115,000. That wasn’t so bad, was it?

Hopefully, all that math doesn’t have you “phased out”. But now you know if you are eligible for contributions to the Roth IRA in 2009.

photo by ysella


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