Check Your 401k to Roth IRA Rollover Income Limits Before Investing
Although the rollover of 401 k to Roth IRA is a beneficial step for employees to get better tax savings, this rollover is not automatic. It is subject to the fulfillment of certain requirements and amendments.
Some of us might be surprised to note that the contributions into Roth IRA are not tax deductible. And contributions to Roth IRA do not figure in the Adjusted Gross Income (AGI) of a taxpayer. This is not the case with other ‘plain vanilla’ retirements savings plans. And although employees can opt to contribute funds from their salary (in part or in full) into the Roth IRA, this option is not available at all income slabs. There are income limits which have to be compulsorily adhered to. This is not the case for conventional retirement savings plans like 401 k or the other types of IRAs or even the Roth 401 k.
The most important points to be noted while opting when considering 401k to Roth IRA rollover are the income limits. To put it plainly, employees with high incomes are not eligible to file for Roth IRA. Individuals earning above $ 120,000 and married joint taxpayers earning above $ 177,000 are prevented from making contributions to the Roth IRA. If a married couple wants to makes full contribution to Roth IRA, they have to have an income below $ 167,000 and for the single taxpayer, the income cap is $ 105,000. The relief to those taxpayers who wish to contribute in part is that if their Adjusted Gross Incomes are below the maximum income limits.
These numbers are adjusted every year and the above mentioned figures are valid only for the year 2010. The exact numbers are determined by the IRS (Internal Revenue Service) each year. The IRS is the revenue service of the Federal Government of the United States of America.
