If your earnings from work are too high, you can't contribute at all. Can you still take advantage of a Roth if you exceed income limits? Yes, but you'll have to use the back door and there are several strategies you can use. The good news is that there is a legal loophole to circumvent the limit and take advantage of the tax benefits offered by Roth IRAs. A teen who earns money with a part-time job, such as child care, can fund a Roth IRA up to the amount they earn or the contribution limit.
So, if you have the money and meet income limits, you can contribute to a 401 (k) plan at work and then contribute to your own Roth IRA. A clandestine Roth IRA strategy is similar to a Roth conversion, but it allows a person to contribute to a Roth year after year for decades if they so desire, while Roth conversions are done all at once or use the Roth conversion scale method. If you or your spouse participate in a traditional qualified retirement plan at work that accepts the renewal of pre-tax (deductible) IRA balances, then you have another way to avoid taxes if you use the clandestine strategy to fund a Roth. You'll also learn about alternative options for getting the benefits of a Roth IRA if you earn more than the Roth IRA limits.
Your MAGI determines your eligibility to make contributions to a Roth IRA, as well as the amount you can contribute. However, keep in mind that your eligibility to contribute to a Roth IRA depends on your income level. Roth IRAs are open to anyone earning income in a given tax year, as long as they don't earn too much or too little. Using this definition of compensation, if your income is above the Roth IRA limit or is zero for a tax year, you won't be able to contribute to a Roth IRA for that year.
So, if they have a traditional IRA and a Roth IRA, they can only deposit the maximum amount allowed during that tax year. While Roth IRAs are often considered retirement accounts and are most often used this way, there are no limits to who can contribute to them and when (as long as they meet the above income requirements). In addition, participating in a qualified retirement plan has no influence on your eligibility to make contributions to the Roth IRA. Anyone with earned income can contribute to a Roth Individual Retirement Account (Roth IRA), as long as they meet income limits.