Question

Michael is single and 35 years old. He is a participant in his employer’s sponsored retirement plan. How much can Michael contribute to a Roth IRA in each of the following alternative situations? (Leave no answer blank. Enter zero if applicable.)

Michael’s AGI is $50,000 after he contributed $3,000 to a traditional IRA.

Answer 1

Michael, who has an AGI of $50,000, can contribute a remaining $2,500 to a Roth IRA for the tax years 2014 and 2015 after having already contributed $3,000 to a traditional IRA, keeping within the $5,500 total contribution limit for individuals under 50.

Step-by-step explanation:

The question at hand concerns Michael, a single 35-year-old participating in his employer’s retirement plan, and how much he can contribute to a Roth IRA given his particular situation. To determine his contribution limits, we need to consider the Internal Revenue Service (“IRS”) guidelines concerning Roth IRA contributions.

For the years 2014 and 2015, the total contribution limit to both traditional and Roth IRAs combined is $5,500 for individuals under the age of 50. This is relevant for Michael whose adjusted gross income (“AGI”) is $50,000 after contributing $3,000 to a traditional IRA. It is important to note that Roth IRA contributions do not reduce AGI as traditional IRA contributions might.

Given that Michael has already contributed $3,000 to a traditional IRA, the remaining amount he can contribute to a Roth IRA would be $2,500 ($5,500 total limit minus the $3,000 already contributed to a traditional IRA). This calculation assumes that Michael’s AGI is below the threshold for full Roth IRA contributions; if Michael’s AGI were higher, his contribution limit might be reduced or phased out entirely.