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. How can I get a "pensionado" visa to retire in Costa Rica?

    Find out how to apply for a pensionado retirement visa for Costa Rica, how to prove your income and obtain a certificate ...
  2. What option strategies can I use to earn additional income when investing in the ...

    Discover how risk-averse investors need to build a retirement portfolio. The major factors are diversification and avoiding ...
  3. What is fiduciary liability insurance, and what are its benefits?

    Understand what fiduciary liability insurance is, what companies or individuals can benefit from having it, and when it is ...
  4. Should I purchase a master limited partnership (MLP) in my retirement account?

    Learn why investors may have to pay taxes on dividends from master limited partnerships, or MLPs, held in individual retirement ...
RELATED TERMS
  1. Current Service Benefit

    The amount of pension benefit accrued by an employee who had ...
  2. Self Invested Personal Pension (SIPP)

    A tax-efficient retirement savings account available in Great ...
  3. Senior Move Manager

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

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

    Definition of Gold IRA
  6. Eligible Transfer

    An IRS-allowed movement of assets into or out of an individual ...

You May Also Like

Related Articles
  1. Professionals

    5 Signs That You Have a Lousy 401(k) ...

  2. Entrepreneurship

    Why Small Business Owners Need Financial ...

  3. Investing

    Feeling Risk-Averse? Consider These ...

  4. Savings

    Investing: How to Make Fast Money in ...

  5. Professionals

    How the Robo-Advisors Differ (& How ...

Trading Center