IRA Changes for 2008
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FacebookIf you’re currently contributing to an IRA, or hope to do so in the near future, then you should be aware of the following IRA-related legislative changes for 2008…
You can now roll assets directly from a 401(k) to a Roth IRA. In the past you had to roll the funds into a traditional IRA and then convert to a Roth from there. This doesn’t get you out of paying any applicable taxes on the conversion, but it makes the process much simpler. In 2008 and 2009 you’ll most likely be eligible for this sort of direct conversion if you make less than $100,000. Starting in 2010, the income limit for Roth conversions goes away (but be careful).
IRA contribution limits are going up. In 2008, the maximum IRA contribution is $5,000 (or $6,000 if you’re 50 or older). And from 2008 onward, IRA contribution limits will be indexed to inflation (in $500 increments).
The income limits for deductible IRA contributions are going up. For tax year 2008, your entire IRA contribution will be tax deductible if your modified adjusted gross income (MAGI) doesn’t exceed $53,000 (for single filers) or $83,000 (for joint filers).
The income limits for Roth IRA contributions are going up. For tax year 2008, you can make the maximum Roth IRA contribution if your modified adjusted gross income (MAGI) doesn’t exceed $101,000 (for single filers) or $156,000 (for joint filers).
Published on January 31st, 2008 - 7 Comments
Filed under: Saving & Investing, Taxes
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About the author: Nickel is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!
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“You can now roll assets directly from a 401(k) to a Roth IRA.”
I didn’t know that they were making this change… That is a good idea and it is long overdue. With the ROTH being as popular as it has been, it was kinda crazy that people had to jump through so many hoops to do a 401k rollover…
Comment by ChristianPF — Jan 31st 2008 @ 1:10 pmHey Nickel,
Any idea how if you can roll from an ESOP to an IRA if I change jobs?
An ESOP is an employee stock ownership plan.
Thanks
Comment by Ron@TheWisdomJournal — Jan 31st 2008 @ 3:47 pmIf income limits on conversions are going away in 2010, why do they keep limit on contributions? Everyone can contribute after-tax money to IRA in 2008 and 2009, then convert in 2010. Since the contributions are after taxes only the interest/gains would be taxable which isn’t likely to be that much in just one year?
What happens after 2010? Will everyone be able to open IRA one year, than convert to Roth the next?
Comment by kitty — Jan 31st 2008 @ 6:09 pmKitty: See this link. It’s not as simple as it appears.
BTW – I read the link about “gotcha”. But if someone doesn’t have regular IRA as of today, only Roth and 401K, it appears that one may be able to do it.
Am I missing something? This is the first year I cannot contribute to Roth, and I was thinking of using traditional IRA->conversion past 2010 scheme.
Comment by kitty — Jan 31st 2008 @ 6:15 pmCorrect. If you don’t already have a regular IRA then it’s much simpler. We’re in a similar boat in that we can’t contribute to a Roth any more, and so I wanted to do a non-deductible Trad IRA and then convert it in 2010. But… I also have substantial savings in a SEP, so it’s not so straightforward.
If my husband passes before retirement, how do I get the $$$ out of his 401k? Are they taxable income? May I “roll” his $$$ into my Roth account?
Comment by EC — Apr 8th 2008 @ 8:56 am