We've been maxing out our Roth IRA every year for a while now. However, it seems like this year, our AGI ($187,047) has moved us into the "phase out" zone for the first time.
Usually, we contribute $6,500 for each of us (for a total of $13,000) investment. (We are over 50.) However, I've used the set-by-step calculator available on the IRA website (
https://www.irs.gov/retirement-plans/plan-participant-employee/amount-of-roth-ira-contributions-that-you-can-make-for-2016) to come up with the amount we can each contribute this year: $4519. From what I read, this means that we will each be able to contribute the remaining $1981 to a traditional IRA.
Questions: I've read that we can convert this traditional IRA to a Roth IRA account later as long as we don't already have a traditional IRA. Is this correct? I just spoke with our TIAA representative and he said it doesn't matter. But I've read otherwise elsewhere. Also, how do I know if we already have a traditional IRA? Are all traditional IRA accounts clearly marked "traditional IRA" on our investment statements or could something be a traditional IRA but not be clearly labelled as such.
Also, I do not understand why the IRA would limit ROTH IRA contributions, then just allow people to immediately convert traditional to Roth IRAs. It seems to defeat the purpose of the income limits. What's up here?
I have a couple other questions, but they depend on the answer to these first questions.
