Traditional and Roth IRA contributions

If an individual earns a high income, she can not make a contribution to a Roth IRA. That does not mean that her Roth IRA has to be closed, but, unlike with a Traditional IRA, a contribution simply can not be made if the individual makes $120,000 or more, or if the married couple filing jointly earns $176,000 or more for 2009. But, many people do not realize that there are no income limits for the Traditional IRA. Don’t worry about how much money somebody makes in the test question, or if she’s covered by an employer plan. All that would change is the amount she can deduct from her contribution. If she’s covered by an employer plan and makes a certain amount of money (say, $53,000 or more), she’d just have to keep track of how much of her contribution went in after-tax, so she doesn’t get taxed twice on that money when it comes out with everything else. But, if she has earned income, she can contribute to her Traditional IRA, either pre- or after-tax. She might not deduct 100%, or even any percent, of it, but it can still go in there. And, don’t forget this: if she’s not covered by an employer plan, she can deduct all of her contribution, regardless of her income. If you disagree with any of this, see IRS Publication 590 at http://www.irs.gov/pub/irs-pdf/p590.pdf