Roth IRAs: High income keeping you from contributing? There may be a way or two…

Many of our clients’ earned income exceeds the limits to contribute to a Roth IRA (See the 2021 limits here) and they think they cannot contribute to a Roth IRA. Does that include you?

There may be a way! Actually TWO ways!

One, is to check to see if you have a Roth option in your 401k plan. If you do, part or all of your 401k contributions can be done as a Roth (after tax) 401k contribution. Roth 401k’s do not have income limits.

The second way is fund a nondeductible traditional IRA and then do a Roth IRA conversion. As of today, there are no income limits on a Roth IRA conversion. Another name for this second idea you may of heard of is the “Backdoor Roth IRA.”

Want to learn more? First, review it with your CPA. If the idea makes sense for you, we can help you set it up. Reach out for your free initial consultation!

Content in this material is for general information only, and is not intended to provide specific advice or recommendations for any individual.

Traditional IRA account owners have considerations to make before performing a Roth IRA conversion. These primarily include income tax consequences on the converted amount in the year of conversion. A Roth IRA offers tax deferral on any earnings in the account. Qualified withdrawals of earnings from the account are tax-free. Withdrawals of earnings prior to age 59 ½ or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax.