If your earned income is too high, you can't contribute at all. You can withdraw tax-free contributions at any time from a Roth IRA. In other words, people with high incomes can't contribute directly to a Roth IRA, but they can contribute to a traditional IRA, and that's where a clandestine Roth IRA comes into play. Contributions that exceed the annual limits of the Roth IRA can result in a penalty from the IRS that could easily eliminate any investment income.
You can contribute to a traditional or Roth IRA even if you participate in another retirement plan through your employer or company. However, you may not be able to deduct all your traditional contributions to the IRA if you or your spouse participate in another retirement plan at work. Contributions to a Roth IRA may be limited if your income exceeds a certain level. Once the conversion is complete, the money in your Roth IRA becomes subject to the Roth IRA distribution rules.
People with traditional IRAs must begin receiving the required minimum distributions when they turn 72, but there is no such requirement for Roth IRAs. Using this definition of compensation, if your income exceeds the limit of a Roth IRA or is zero for a fiscal year, you will not be able to contribute to a Roth IRA during that year. This and other key differences make Roth IRAs a better option than traditional IRAs for some people saving for retirement. The financial institution that maintains its contributions to a traditional IRA transfers them directly to the institution that holds its Roth IRA.