Ask the Expert: What are the rules for Roth IRA contributions?

You've written that after a person begins taking required minimum distributions (RMDs) from an IRA, he can no longer contribute to the account. But can I still contribute to a Roth IRA once I'm taking RMDs from my traditional IRAs?

Maybe. It depends on your annual income and whether you're still working.

Your last potential contribution to a traditional IRA is for the year before you turn 70½. But you can make Roth contributions at any age, on two conditions. Your annual income cannot exceed an annual limit set by the Internal Revenue Service, and you must have some earned income, like a salaries, bonus, commissions or tips.

Last year, Roth IRA contribution eligibility phased out for single taxpayers with Modified Adjusted Gross Income (MAGI) between $120,000 and $135,000 and for married couples filing jointly with MAGI between $189,000 and $199,000. In 2019, it phases out for single taxpayers with MAGI between $122,000 and $137,000, and for joint filers with MAGI between $193,000 and $203,000.

Our 2018 taxable income was greater than we anticipated due to the new $10,000 cap on real estate tax deductions and my RMD. As a result, my wife over-contributed $3,700 to her Roth IRA. I was advised I must withdraw this money or face a fine, and immediately withdrew it. How does the IRS view this withdrawal? Since it's from a Roth, I believe it won't be income on next year's tax return — or am I wrong about that?

You're right. The excess Roth contribution was made with after-tax dollars, and withdrawing it won't increase your taxable income. But any investment income in the Roth that's attributable to the excess contribution must also be withdrawn — and it is taxable.

The bottom line

Roth IRA contribution eligibility depends on the nature and amount of your income.

More information

irs.gov/retirement-plans/retirement-plans-faqs-regarding-iras-contributions

irs.gov/retirement-plans/plan-participant-employee/retirement-topics-ira-contribution-limits