Does my income influence whether I am able to contribute to a regular IRA and then convert it to a Roth IRA?

Asked by Erin

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Answered by Dave Bradley, Investment Manager (Financial Advisor) in North Charleston, SC
Hey Erin,

Thanks for another good question. Yes, IRA contributions are based on Modified AGI, and filing status, other retirement plans, and earned income are some other important considerations.

Here is a link to the IRS:
2016 IRA Contribution and Deduction Limits - Effect of Modified AGI on Deductible Contributions If You ARE Covered by a Retirement Plan at Work

Keep in mind that if/when you convert to a ROTH IRA from a traditional IRA. There are other considerations like taxes & holding period.

Here is a link to the IRS for conversion info: IRA FAQs - Rollovers and Roth Conversions

Keep in mind that if your future tax rate is the same or lower than your current tax rate, the ROTH may not benefit you very much.

As always, contact us directly to discuss your situation in greater detail. No obligation.

It's not what you make; it’s what you keep that determines your lifestyle. | 06.30.16 @ 20:03
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$commenter.renderDisplayableName() — {comment} | 12.05.16 @ 04:40
Answered by Lora Murphy, CPA, CFP®, CDFA® in Milwaukee, WI
Hi Erin,

I can't offer you personal advice, because I have not looked at your comprehensive financial situation. Educationally, however there are no longer income limits to be able to convert from a traditional IRA to a Roth IRA. Income tax consequences would need to be considered because depending on your situation, you may need to pay income tax upon the conversion. Form 8606 needs to be completed in the year of conversion and included with your Form 1040. Form 8606 calculates the amount of tax owed on conversion. | 08.22.16 @ 21:39
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$commenter.renderDisplayableName() — {comment} | 12.05.16 @ 04:40
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