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Is A Roth IRA Conversion Right For Me?

Sep 24, 2019 12:04:40 PM / by RL Wealth Partners

What is a Roth IRA?

A Roth IRA is an after-tax qualified account that encourages you to save for retirement by allowing contributions and earnings to grow tax free. As opposed to a traditional IRA that is funded using before-tax dollars, a Roth IRA is funded using earnings that have already been taxed, offering a tax benefit. This also means that your withdrawals in retirement typically will not be taxed – compared to a traditional IRA, whose withdrawals are taxed as income. Once you’re age 59 ½ and have had a Roth IRA account for five years or longer, any money that you take out including earnings will not be taxable.1

How can I fund a Roth?

Anyone who meets the income limits and who has earned income from a job can use these after-tax dollars to contribute up to $6,000 (2019) per year to a Roth IRA. Individuals who are age 50 or older with earned income can contribute up to $7,000 per year. One major difference between a traditional IRA and a Roth IRA is that the IRS puts contribution limits on Roth IRAs based on how high your income is.

Unlike a traditional IRA, in which income does not affect the amount you are allowed to contribute, you may only be able to make a partial contribution to your Roth IRA if your modified adjusted gross income (MAGI) is above a certain range.

For example, if you are married filing jointly and earn between $193,000 and $202,999 in 2019, you may only be able to make a partial contribution. And if that value is more than $203,000 per year as a married couple filing jointly, then you may not qualify to open a Roth account.1 There are also limits for individuals filing single status as well as married filing separately.

What are my options?

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