How does the Roth IRA contribution work?
Assume individual Jane decides to set aside $1,000 of her pretax income for an IRA contribution. She could contribute the entire $1,000 to a traditional IRA because the deduction for the contribution would effectively eliminate any current tax on the $1,000. Since a contribution to a Roth IRA is not deductible, she could contribute to a Roth IRA only the amount remaining after paying tax on the $1,000. Assume T is, at all times, taxed at a flat 30 percent. She could therefore make a Roth IRA contribution of $700 ($1,000 less 30 percent thereof).
Please contact one of our Roth IRA Experts at 800-472-0646 for more information.