Roth IRA maximum income?

[Pemolis]

I've been trying to find more information on this, and what I got from the IRS made no sense.

I'm also a baby at investing, and have literally a ton of general questions, but the Roth ones is the one that's got me.

I'm a LEO GS 13-1 in New York, which means I should make about 115,323 a year (gross, after taxes, social security, medicare, every other deduction, its actually 65000 from my calculations). From my understand, the Roth cap is between 110,000 to 125,000 annual salary, with some weird sloping mod. My Questions:

1) Could I put more into my TSP to drop my annual salary from 115,323 to 109,999 so that I get under this mythical Roth adjustment cap?

2) If the Roth does show up in the TSP this year, would it still factor in this salary cap (I am assuming yes)

3) Can I have both a Roth and a IRA open (5000 into roth, 5000 into ira yearly? or am I missing something)

4) On taxes, when I put in my IRA information (Lets say both my Roth and IRA contributions were 5000 this year, and each made $300), how much in taxes would I have to pay out of pocket to the IRS (have to factor it so I can save for it.

5) Would I receive notice (like a Roth W2) from the place I have my Roth in each year?

Trying to plan early and make my money work for me, just some basic questions I had which I could not find any understandable answers to.

 

[seven]

I'm pretty new too, but here's what I think the answers are to some of your questions. Hopefully someone more knowledgeable will chime in.

1. Info on IRA limits for 2012 is here:2012 IRA Contribution and Deduction Limits

2. I'm not sure on this, but I wouldn't think so.

3. You can do both, but the $5,000 is a COMBINED limit. Details are at the same link above.

4. On your taxes you only put the amount of the contribution for the year. How your retirement accounts perform doesn't factor in at all & there is no place to put that info. If you take money out of a retirement account you have to report that on your taxes too.

5. I think you get a form 5498 showing the contributions you made & the fair market value of the count.

 

[Pemolis]

1) I tried to understand that, but I'm getting 2 conflicting issues. Mainly what this cap is. Being a leo, I do get a pension, but I don't know if that means my cap for even starting a IRA or a Roth IRA is possible, if its 110,000 or by that table, 60,000? Remember, Baby Investor, I don't know these tax traps that are around. Would that mean that the Roth IRA I started I would have to close because I get a pension from my job? Does it mean that I can't start an IRA, can start one? etc? I've read the tables, but Kind of need the Lay person (aka non-accountant or IRS agent) answer.

 

[seven]

Assuming your single, the MAGI limit to make a full contribution to a Roth IRA is $110,000.

I don't think your pension factors into it at all.

 

[Boghie]

Pemolis,

Beware asking tax questions on a message board:nuts:

Anyway, my ignorant read is:
1) Could I put more into my TSP to drop my annual salary from 115,323 to 109,999 so that I get under this mythical Roth adjustment cap? Yes. I looked at my IRS 1040 form and only 'Taxable Income' is placed in Line 7. Your TSP and FEHB benefits come out as part of the AGI. I'm actually surprised at this.

2) If the Roth does show up in the TSP this year, would it still factor in this salary cap (I am assuming yes)? A Roth TSP (actually a Roth 401(k)) will not have a $5,000 limit - it will be the 401(k) limit which is $17,000 this year. But, yes, the income limits will be in effect. Be carefull, these accounts have differing limits.

3) Can I have both a Roth and a IRA open (5000 into roth, 5000 into ira yearly? or am I missing something). You cannot invest in a Traditional IRA - unless you want to make non-deductable contributions because you have a 401(k) - that is, TSP. The total investement you can make in your 401(k) options is limited to $17,000 combined. You may contribute $17,000 to TSP and the max to a Roth IRA (I think $5,000 this year). I have no idea if you can continue to contribute to a Roth IRA when the Roth 401(k) becomes available. See the Traditional 401(k) and Traditional IRA discussion.

4) On taxes, when I put in my IRA information (Lets say both my Roth and IRA contributions were 5000 this year, and each made $300), how much in taxes would I have to pay out of pocket to the IRS (have to factor it so I can save for it. None. You don't pay taxes on the growth of any retirement account. However, you cannot contribute to a Traditional IRA while contributing to a Traditional 401(k).

5) Would I receive notice (like a Roth W2) from the place I have my Roth in each year? You will receive a statement, but nothing like a W2. It will look more like the annual statements you get from TSP. As long as you keep your assets inside the retirement account you really don't have much (any) accounting to do. Your W2 from work will have all the computations in it. And, if you elect (can) invest in a Roth IRA than nobody cares how much you contribute (up to the limit), and nobody cares how much it increases or decreases.

You have lots of good questions. It will be interesting to see how HRO (or Civilian Pay) offices deal with the mix.:blink:. Personally, a bit of advice from a tax expert is probably in order for you. Ever deal with the IRS before. I haven't and won't (hopefully) because when I come to the point of making the financial moves you are I will talk to someone who really knows their stuff. I'd hate to battle the IRS and spend time in the Grey Bar Motel...

 

[Pemolis]

Thank you for the feedback Boghie. I believe I can break this down into a simple 2 questions.

1) Regarding the Modified Adjusted Gross Income (MAGI). Would it be based on my Gross income before non-taxable income (the overall), or the amount after the non-taxable's have been withdrawn (such as the tsp, health insurance, etc).

2) Can I apply for a ROTH ira and put in the max )($5000 into it).

 

[tsptalk]

Thank you for the feedback Boghie. I believe I can break this down into a simple 2 questions.

1) Regarding the Modified Adjusted Gross Income (MAGI). Would it be based on my Gross income before non-taxable income (the overall), or the amount after the non-taxable's have been withdrawn (such as the tsp, health insurance, etc).

2) Can I apply for a ROTH ira and put in the max )($5000 into it).

1) It is based on your AGI (adjusted gross income) so your TSP contributions would not be included in that amount. I don't know about health insurance, but if it is based on AGI, it is after all of your allowable deductions.

2) It looks like it depends on your age (if you are 50 or not.) Here is a chart from T.Row Price.

Roth IRA: Overview of Roth IRA Rules and Limits - T. Rowe Price

 

[Warrenlm]

Just to note one nit with a post above. One may contribute to both a non-deductible Traditional IRA and a 401K/TSP up to their respective contribution limits.

 

[seven]

Just to note one nit with a post above. One may contribute to both a non-deductible Traditional IRA and a 401K/TSP up to their respective contribution limits.

Good point. I always forget about non-deductible tIRA contributions.

 

[Pemolis]

Heh everybody has calculator's but there are rarely any specific answers to these things I guess. I understand the AGI now, I just don't know if the Federal Pension falls under that "contributing to an employee program" clause. Guess I'm literally looking for the definition of both the Fers Pension Program, and the "Contributing program" for the Roth. Eitherway, I'm under the 110,000 due to the TSP (finally some good news)., and thanks for the followup Seven, Warrenlm and tsptalk.

True I knew I could put into a Traditional IRA, the Roth IRA is just confusing. Thank you again.

 

[Mapper]

Just to note one nit with a post above. One may contribute to both a non-deductible Traditional IRA and a 401K/TSP up to their respective contribution limits.

Ok, getting confused. To clarify...I CAN contribute to my TSP AND a trad/roth IRA; up to their respective limits, if I so chose. Right? Meaning I could do the $17k into TSP and $5k into trad/roth IRA combined.

Second. Do we know how the RothTSP will impact our contributions limits in outside IRA accounts? Will it be limited to $5k or can we elect up the the full $17k as a Roth (not that I could afford that after tax!)

Trying to guess about the potential tax ramifications of these options is a real gamble.

 

[seven]

I assumed it'd be the same $17,000 limit, but now that you ask I'm not sure. I tried reading https://www.tsp.gov/PDF/bulletins/regs-roth-2012.pdf but that doesn't give a dollar amount & just says:



Like tax-deferred employee
contributions, Roth contributions are
subject to the Internal Revenue Code’s
elective deferral limit. See 26 U.S.C.
402A(c)(2); 26 CFR 1.402(g)–1(b)(5)

So, does that mean it's the same as the deferral limit? $17,000?

I do know that employer match & contributions won't go into the Roth, so even if you plan to put all you can into the Roth (like I do) then you will still have a traditional TSP account with your employer contributions.

 

[Frixxxx]

I assumed it'd be the same $17,000 limit, but now that you ask I'm not sure. I tried reading https://www.tsp.gov/PDF/bulletins/regs-roth-2012.pdf ...
So, does that mean it's the same as the deferral limit? $17,000?

From what my tax guy is telling me...
I can drop $17K into TSP 401 plan
&
$5K into TSP Roth

I do know that employer match & contributions won't go into the Roth, so even if you plan to put all you can into the Roth (like I do) then you will still have a traditional TSP account with your employer contributions.

I'm also being told that all matching MUST go into the traditional 401 plan.

 

[Mapper]

Huh...so from that, it sounds as if the TSP Roth will count toward collective IRA limits? I wish TSP would just put out all the details...It shouldn't be that complex. Putting up that video and saying more to come just fuels a load of rumors.

 

[Birchtree]

I wouldn't bother with a TSP Roth - you can find better opportunities with more flexibility offering a multitude of investment choices. My daughter has a 401K Roth with her employer and is held to $17,000.

 

[Mapper]

I'm trying to put max contributions in my TSP and IRAs this year...now it's just a matter of finding the best tax approach.

So, you are correct. If my Roth limit is $5k either way then I'll stick to putting money in a SD Roth IRA. BUT if the ROTH TSP has a $17k limit, then I may want to take that approach. Avoiding taxes on my investment gains is appealing.

 

[jpcavin]

I'm trying to put max contributions in my TSP and IRAs this year...now it's just a matter of finding the best tax approach.

So, you are correct. If my Roth limit is $5k either way then I'll stick to putting money in a SD Roth IRA. BUT if the ROTH TSP has a $17k limit, then I may want to take that approach. Avoiding taxes on my investment gains is appealing.

It is my understanding that a:
traditional IRA and a Roth IRA have the same limits...5K
A regular 401K and Roth 401K = 17,000K
A TSP 401 and a TSP 401 Roth = 17000K
One is pre-tax and the other is post-tax

I am not aware of TSP offering an IRA account. Only 401k equivalent

 

[Mapper]

Thanks

I was speaking of an outside IRA.