My certificate of deposit (CD) has just matured and I plan to contribute $10,000 of it to my current Roth IRA account. The person doing my taxes can't tell me why I can't make such a large contribution except for my low income - I am a disabled veteran on

By Denise Appleby AAA
A:

Your regular Roth IRA contribution can't exceed $4,000 annually. If you are at least age 50 by Dec 31, 2005, you can contribute an additional $500, bringing your annual contribution limit to $4,500. However, if your income for the year is less than $4,000, your contribution can't be higher than your income. For instance, if your income for the year is $3,000, you may contribute no more than $3,000 for the year.

These contribution limits are established by federal law. If you contribute more than the limit, the excess amounts may be subject to penalties and excise taxes, unless you remove the excess amount by certain deadlines.

Here's another option to consider: if the $10,000 is from a Traditional IRA CD, then you can put the entire amount in your Roth IRA as a Roth IRA conversion, provided your modified adjusted gross income (MAGI) is not more than $100,000 and your tax filing status is not married filing separately. The $100,000 limit applies to you and your spouse if you are married, which means your joint MAGI cannot exceed $100,000.

You may find IRS publication 590 helpful.

(For more on Roth IRA conversion, see Avoiding IRS Penalties on Your IRA Assets, Did Your Roth IRA Conversion Pass or Fail? and Roth IRA: Back to Basics.)

This question was answered by Denise Appleby
(Contact Denise)

RELATED FAQS

  1. Is it a good idea to add a reverse mortgage to your retirement strategy?

    A reverse mortgage can be a great way to increase retirement income. Does it work for everyone? What happens after a homeowner ...
  2. What are the keys to setting up a trust fund?

    Setting up a trust to secure your assets for a beneficiary allows you to set the terms under which the beneficiaries are ...
  3. What does amortization mean in the context of a pension plan?

    Discover when and why accountants use amortization techniques in the context of pension plans, and why those changes help ...
  4. Can I purchase mutual funds for my IRA?

    Learn how to invest your IRA assets in mutual funds. Discover a few of the different types of mutual funds available for ...
RELATED TERMS
  1. Senior Move Manager

    Senior move managers (SMMs) help seniors downsize and relocate ...
  2. Elder Care

    Elder care, sometimes called elderly care, refers to services ...
  3. Gold IRA

    Definition of Gold IRA
  4. Eligible Transfer

    An IRS-allowed movement of assets into or out of an individual ...
  5. Death Master File (DMF)

    Also known as Social Security Death Index. A list of people whose ...
  6. Leveraged Benefits

    The use – by a business owner or professional practitioner – ...

You May Also Like

Related Articles
  1. Professionals

    Retirement Bliss? Not So fast: When ...

  2. Professionals

    Multiple Accounts? Here's How to Calculate ...

  3. Professionals

    Financial Planning Tips And Resources ...

  4. Professionals

    Where You Clients Should Retire (For ...

  5. Professionals

    Should Your Retiring Clients Pay Off ...

Trading Center