About that max income limit to contribute to a Roth...

[Anonymous]

We usually contribute max to our Roths but this year is the first year we're going to be flirting with the income limit where contribution limits start to phase out ($181k). Income may be in the mid $180s when it's all said and done, depending on a bonus that may come through. According to something I read, that income limit may be adjusted income and not just gross that makes up that limit but I'm not certain. Does anyone know for sure?

I know it's a question we should clarify with our CPA this tax season but I wondered if anyone knew off the top of their head. Thanks!

[Anonymous]

Just do a backdoor Roth

[Anonymous]

It is adjusted not gross.

[Anonymous]

Anonymous wrote:Just do a backdoor Roth

NP here. I thought once you established and contributed to a Roth, you couldn't do a backdoor into that account and that you'd have to do a backdoor into a whole new Roth (which would obviously slow the growth in your current account). Am I wrong? I would like to be!

[Anonymous]

Anonymous wrote:

Anonymous wrote:Just do a backdoor Roth

NP here. I thought once you established and contributed to a Roth, you couldn't do a backdoor into that account and that you'd have to do a backdoor into a whole new Roth (which would obviously slow the growth in your current account). Am I wrong? I would like to be!

I have no idea if the first 1/2 if your comment is true - maybe a financial planner chime in? But even if so, the second 1/2 isn't true. If you open an identical type of account and invest in the same investment vehicle, your total returns would be the same... That's math.

[Anonymous]

search the IRS website for an official tax document that will give you a definitive answer on this.

I'm pretty sure it's adjusted. Your pre-tax 401k contributions are deducted from your income, so that helps a little.

[Anonymous]

It is adjusted. My husband and I made close to 200K last year but we qualified for Roth because our 35K contribution to our 401Ks was deducted from our gross income.

[Anonymous]

I thought you could contribute to the Roth up until March, so why not wait until you get your tax forms and then contribute?

[Anonymous]

Thanks for the responses, all. Was thinking about putting it all in now to get another year of growth and trying to avoid the extra step of the backdoor if possible - although in fairness, I haven't even read all that much about the backdoor yet as it has never been an issue before, so I don't know all the details. Thanks again.

[Anonymous]

There is no income limit for Roths.

[Anonymous]

We have been flirting with the MAGI phaseout for a couple years. Ideally you should wait until you file your return, as you don't want to create extra headaches, put there money in an after tax account if you don't want it out of the market during the wait. If you really want to do it now - I would err on the side of caution and do the Backdoor. If you contribute to the traditional and immediately recharacterize it to a Roth there will be no tax amount to worry about (since there would likely be no gain in that short period).

The only caveat is if you have existing traditional iras or rolled over a 401k to a traditional IRA. I you have any traditional IRAs you need to get rid of them before you do the conversion, unless you plan to convert them also. Ideally you would roll the traditional deductible iras into your current employer's 401k or TSP, then they don't enter into the calculation for the conversion.

[Anonymous]

Anonymous wrote:There is no income limit for Roths.

Hi! Welcome to earth, hope you enjoy your stay! There are modified adjusted gross income limits on ROTH contributions here (in the US, which is where you landed), unless you do not have access to an employer plan.

I am glad you found the Internet, it is very useful for both entertainment and research. To get you started, I highly recommend Google - www.google.com.

[Anonymous]

Anonymous wrote:

Anonymous wrote:There is no income limit for Roths.

Hi! Welcome to earth, hope you enjoy your stay! There are modified adjusted gross income limits on ROTH contributions here (in the US, which is where you landed), unless you do not have access to an employer plan.

I am glad you found the Internet, it is very useful for both entertainment and research. To get you started, I highly recommend Google - www.google.com.

+1

Op I'm in the same situation. We do our taxes ourselves and the software told us the limit (per person) based on the scale.

[Anonymous]

If you are a high wage earner and don't convert your IRA contributions to ROTH, please do some actual research.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Just do a backdoor Roth

NP here. I thought once you established and contributed to a Roth, you couldn't do a backdoor into that account and that you'd have to do a backdoor into a whole new Roth (which would obviously slow the growth in your current account). Am I wrong? I would like to be!

I have no idea if the first 1/2 if your comment is true - maybe a financial planner chime in? But even if so, the second 1/2 isn't true. If you open an identical type of account and invest in the same investment vehicle, your total returns would be the same... That's math.

Neither part of this original comment is true. You can backdoor into an existing Roth, so it doesn't matter, that as PP points out your total retirement savings will be the same. However, there are complications with the backdoor if you have any other existing accounts that are not Roth. That prevents many people from using it, as you have to convert (and pay taxes on) the gains from all your non-Roth accounts to use the backdoor. In other words, you can't just backdoor the new contributions alone.