Can you just contribute to a Roth IRA nowadays?
Husband is making $500,000 and contributes in full to his 401(k). What’s the easiest way to get her $6,000 IRA contribution into a Roth?
Husband is making $500,000 and contributes in full to his 401(k). What’s the easiest way to get her $6,000 IRA contribution into a Roth?
Permalink Submitted by Joseph Arsenault on Fri, 2010-11-19 19:43
There is a workaround by contributing to a non-deductible IRA and then turning around and converting it.
I just wrote about this in one of my planning articles.
http://www.cafetax.com/2010/11/12/roth-conversion-planning-ideas/
Permalink Submitted by Alan Spross on Fri, 2010-11-19 19:49
Their modified AGI is far too high to make regular Roth IRA contributions or deductible TIRA contributions.
She (or both of them) would have to make non deductible TIRA contributions and then convert any portion they wish of their traditional IRA balance to a Roth IRA. The conversion will be tax free only if the amount of basis from non deductible contributions at least equals the account value of all their TIRA accounts. Pro rate rules apply to the conversion per Form 8606. But they could adopt this strategy every year, ie make the non deductible contribution and immediately convert it to a Roth IRA.
Permalink Submitted by mk foss on Sat, 2010-11-20 02:37
If the individual’s 401k had a Roth feature, he could split his 401k contribution between the Roth 401k and the deferred 401k amount. There is no income limit and the contribution limit is the 401k limit for that type of Roth contribution. The Small business jobs act is also making it easy to convert 401k funds to Roth but 2010 may not be the best year to do that. I’d want more guidance before encouraging that type of conversion.