Assuming you're eligible for Roth IRA contributions, let's say you deposit $9,000 over three years. While you'd normally subtract items like student loan interest or tuition and fees, you won't for the purposes of determining your modified AGI for a Roth IRA. If you're married filing jointly or separately and you lived with your spouse, take that number and divide by $10,000. Roth IRAs are not subject to required minimum distributions (RMDs). You invest those contributions in low-cost mutual funds, and your balance grows to about $13,000 in six years. The table below shows the pros and cons of both account types. Let's conquer your financial goals together...faster. Personal finance writer. You'll have a broad range of investment possibilities including virtually any stock, bond, or fund. Importantly, the $6,000 (or $7,000) contribution limit applies to all IRAs. Some may see a reduced contribution limit based on their modified AGI. That's the maximum amount you and your partner can each contribute to your Roth IRAs. Those contributions won't be tax deductible, though, if your Roth contributions are limited by your income and you have a 401(k) at work. You'll still owe taxes on the funds at the time of conversion. Once you've determined your modified adjusted gross income, you simply have to compare it to the following table to determine your eligibility. Ultimately, an employer-sponsored 401(k) shouldn't prevent you from getting money into a Roth IRA. They can utilize the backdoor Roth IRA strategy. Employers often match a portion of contributions -- however, matching contributions are made with pre-tax dollars and contributed to a separate traditional 401(k). Thus a Roth IRA can be a good vehicle to save for preretirement goals if you otherwise wouldn't contribute to an IRA. Best RealtyShares Alternatives For All Investor Types, 7 Google Finance Portfolio Replacements & Alternatives, Bury Your Money: Put Your Money & Investments in "Time Capsules", The Backdoor Roth: Investing in a Roth IRA for High Earners. For example, if you're a married couple and you have a combined AGI of $200,000, you'd subtract that amount from $206,000, the maximum AGI allowed to make any contribution. 401k vs Roth IRA. Yes, you can contribute to both a 401(k) and a Roth IRA, but there are certain limitations you'll have to consider. Roth 401(k)s are less common than traditional 401(k)s, but an increasing number of employers offer them. Before Roth 401(k)s became prevalent, Roth IRAs were often the only option for workers preferring to defer tax savings for retirement contributions.

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