IRA Rollover

I've been questioning the effect that rolling a 401(k) to a Roth IRA (in 2008 this can now be done without rolling into a traditional IRA first) has on contribution limits in a tax year for a while, and it looks like I finally got an answer today. Per bankrate.com, "According to Internal Revenue Code (IRC) Section 408A(c)(6)(B), qualified rollover contributions do not count toward the annual maximum contribution limit applicable to Roth IRAs." Of course I checked out the Cornell Law Code Collection (a great resource) to ensure that it is actually in the code, based on the very sketchy and typically incorrect information on IRAs on the internet, and did verify that the advice was correct. The link actually includes the entire code related to Roth IRAs, which is pretty helpful for answering any tax questions that might come up.

I'm also going to add the limits for 2008. Going forward they will be pegged to inflation.

From the IRS website:

Roth IRA contribution limit. If contributions on your behalf are made only to Roth IRAs, your contribution limit for 2008 will generally be the lesser of:

• $5,000, or

• Your taxable compensation for the year.

If you were age 50 or older before 2009 and contributions on your behalf were made only to Roth IRAs, your contribution limit for 2008 will generally be the lesser of:

• $6,000, or

• Your taxable compensation for the year.

However, if your modified AGI is above a certain amount, your contribution limit may be reduced. For more information, see How Much Can Be Contributed? under Can You Contribute to a Roth IRA? in this chapter.

Modified AGI limit for Roth IRA contributions increased. For 2008, your Roth IRA contribution limit is reduced (phased out) in the following situations.

• Your filing status is married filing jointly or qualifying widow(er) and your modified AGI is at least $159,000. You cannot make a Roth IRA contribution if your modified AGI is $169,000 or more.

• Your filing status is single, head of household, or married filing separately and you did not live with your spouse at any time in 2008 and your modified AGI is at least $101,000. You cannot make a Roth IRA contribution if your modified AGI is $116,000 or more.

• Your filing status is married filing separately, you lived with your spouse at any time during the year, and your modified AGI is more than -0-. You cannot make a Roth IRA contribution if your modified AGI is $10,000 or more.