Ask Terry Questions Roth IRA and 457 contribution?

Roth IRA and 457 contribution?

By Terry Savage on March 01, 2014 | Financial Planning / Retirement

I am a city of Chicago employee and am contribute the maximum I can into my 457 deferred compensation plan.
My question is do you recommend a Roth IRA before April 15 for tax purposes?

Terry Says:  There’s no tax implication to a Roth IRA contribution.  That is, you don’t get a tax deduction, but you do get tax free growth of your money.  And yes, you can contribute both to a 457 and to a Roth IRA in the same year — $5,500, or $6500 if age 50 or older.

BUT you must fall within certain income limits to make a Roth Contribution.    For 2014, an individual can contribute the maximum to a Roth IRA if your income is $114,000 or less. Roth contribution amounts start to phase out for adjusted gross incomes between $114,000 and $129,000 for single or head of household taxpayers in 2014 (up from $112,000 and $127,000 in 2013). If you make more than $129,000 in 2014, you will not likely be eligible.

The income limits are different if you are married and filing jointly. Married couples can make a full contribution to a Roth IRA if your combined adjusted gross income is $181,000 or less. You are not eligible for a Roth if your AGI is more than $191,000. Contribution limits for a Roth IRA phase out between $181,000 and $191,000 in 2014, up slightly from $178,000 and $188,00 in 2013.



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