If you don't qualify to deduct your IRA contributions, you can still accumulate money up to the annual limit in a traditional IRA. While there are ways to introduce money behind closed doors into a Roth IRA, such as contributing to a traditional IRA and converting to Roth, you can't invest money directly in a Roth IRA if your income exceeds the annual limit. While it's ideal not to use IRA money until retirement, sometimes life gets in your way and you may want to access the money sooner. If you also invest in a Roth IRA, the sister of the traditional tax-free IRA, in which you keep money after taxes in exchange for future tax-free withdrawals, the total amount of money you can contribute to both accounts cannot exceed the annual limit.
However, there are exceptions to early IRA withdrawal penalties, such as using the money to pay for the costs of buying a first home or for unreimbursed medical expenses. The money invested in a traditional IRA can grow tax-free until you start withdrawing money as a retiree. If you are going to transfer money from one IRA to another, for example, to change custodian or consolidate accounts, request a direct transfer from one trustee to another. If you don't qualify to make a deductible contribution, you can still invest money in a traditional IRA.
If you make too much money, you may still be able to contribute to a Roth IRA through a strategy called a clandestine Roth IRA. Non-spousal beneficiaries who inherited an IRA (either a traditional IRA or a Roth IRA) after that date must now withdraw money from the account within a decade. While you can make non-deductible contributions to a traditional IRA no matter how much money you make, you are subject to an income limit for deductible contributions if you or your spouse have access to an employment retirement plan.