The MAGI is calculated by taking adjusted gross income (AGI) from your tax return and adding up deductions for things like student loan interest, self-employment taxes, and higher education expenses. People who juggle multiple IRA accounts or who set automatic contributions that are too high could end up investing too much money in a Roth IRA or a traditional IRA. If you (and your spouse, if you are married) are covered by an employer-sponsored retirement plan, the traditional IRA tax deduction may be limited based on your modified adjusted gross income (MAGI), which is your income, before subtracting the interest tax deduction on student loans and other tax deductions. Converting to a Roth IRA from a taxable retirement account, such as a 401 (k) plan or a traditional IRA, has no impact on the contribution limit; however, making a conversion increases the MAGI and may cause or increase the phasing out of the Roth IRA contribution amount.
If you don't have taxable compensation but file a joint return with an earning spouse, you can open an IRA in your name and make contributions through a spousal IRA. 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. You may be able to get around income limits by converting a traditional IRA to a Roth IRA, which is called a clandestine Roth IRA. However, you can still contribute to a Roth IRA and make cumulative contributions to a Roth or traditional IRA, regardless of your age.
In addition to the general contribution limit that applies to both Roth and traditional IRAs, your contribution to the Roth IRA may be limited depending on your reporting status and income. There is a different set of income thresholds for traditional IRA tax deductions for married couples, in which one spouse is covered by an employment retirement plan and the other spouse doesn't work or doesn't work, for example. The IRS generally announces the amounts and limits of IRA contributions and your eligibility for the next tax year, around the fourth quarter (Q) of the previous tax year. The five-year Roth IRA rule states that you can't withdraw your earnings tax-free until at least five years after you've first contributed to a Roth IRA.
A couple must file a joint tax return for the spousal IRA to work, and the contributing partner must have sufficient earned income from work to cover both contributions. Every year you make a contribution to the Roth IRA, the custodian or trustee will send you Form 5498 with information about IRA contributions.