Conversion to a Roth???

I have a client who wants to contribute to a non-deductable IRA for the next few years and then convert to a Roth. Can he do that? He maxes out retirement plan and make too much money just to do a straight up Roth.

Any guidance would be great.

Mike Sicuranza, CFP



Yes, anyone with earned income and still under their 70.5 year can make a non deductible TIRA contribution and file Form 8606 to report it. They will then be eligible to convert to a Roth in 2010 and later when the income limits for conversions no longer apply.

However, the conversion will only be tax free to the extent of 8606 basis vrs the total value of SEP, Simple and TIRAs. A taxpayer cannot just convert the non deductible contributions by themselves. Still, using this strategy is the only way many people will have to get funds into a Roth IRA.

Client should also check to see if employer offers a Roth option in the company plan. He could get funds into a Roth right away if the plan offers this option, and his contribution could be split between the Roth and pre tax account. Income limits do not apply to employer plan Roth account contributions.



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