Roth Contributions after 2010
I understand all of the pros/cons of having clients convert in 2010, but what do the laws do in 2011 and beyond regarding households with high AGIs and making on-going contributions to those new Roths created in 2010. Example is a current client likes the idea of converting in 2010, but would upset if he cannot fund that account after 2010 since his AGI is very high.
Permalink Submitted by Alan Spross on Thu, 2009-04-16 20:51
The regular Roth contribution income limits are adjusted annually for inflation, however a “very high AGI” taxpayer will probably remain well over the max income for allowable regular Roth contributions. However, there is NO income limit for non deductible traditional IRA contributions, and a taxpayer could make these contributions annually and then convert them to a Roth IRA immediately thereafter. The Roth conversion income limits end after 2009. Form 8606 is filed to report the non deductible traditional IRA contribution and the same form is used to report the annual conversion to a Roth IRA. This is most likely the only way such a taxpayer could continue to fund the Roth IRA after converting all other available traditional IRA or qualified plan balances to a Roth IRA.
The regular IRA contribution limit is currently $5,000 and receives periodic inflation adjustments. The current catch up contribution is 1,000 and this limit is not adjusted under current law.
Permalink Submitted by Rick Disharoon on Fri, 2009-04-17 17:29
Alan, thank you for the response. So the conversion limits disappear after this calendar year moving forward, but the household income limits that determine the ability to fund Roths will continue to be in place (indexed for inflation). Your strategy of converting nondeductible contributions solves the client concern. Thanks.