This post is not meant as a flex about earnings, I’m honestly just confused and trying to figure out if I can put money in a Roth IRA.
My income: 166K. I max out my 401k every year so next year it will be $24500.
Spouse income: 100K. No 401K, just a pension.
We are married and file jointly.
Question 1: with this income level I don’t think I can contribute to a Roth IRA since everything I’ve read says >$246K means no contributions. Correct?
Question 2: Am I able to do the backdoor Roth and put anything in a traditional IRA then convert? I have both a traditional IRA account from an old 401k and a Roth account from college so I assume I can utilize preexisting accounts?
Question 3: if I can put in the Trad IRA, is it as easy as transferring funds into the IRA then immediately converting them to a Roth or do I have to invest the funds first? I’m super confused how the backdoor Roth works logistically between accounts and whether you move the money first and then invest it or invest and then convert somehow??
Sorry for the idiotic questions. I find the back door generally confusing.
Back door Roth for high earners
byu/AvidVenturest inpersonalfinance
Posted by AvidVenturest
4 Comments
You’re definitely under the income limit for direct Roth contributions – the phaseout starts around $228k for married filing jointly in 2024
For backdoor Roth, yeah you can do it but having that existing trad IRA from your old 401k complicates things because of the pro-rata rule. You might want to roll that into your current 401k first if possible to clean the slate
The process is pretty straightforward once you sort that out – contribute non-deductible money to trad IRA, then convert to Roth right away. Most brokerages let you do the conversion online, no need to invest first
The incomes limit is based on your MAGI also. The standard deduction alone takes you under the limit. Plus I’m assuming you pay health care costs and contribute to 401k.
So your income is likely much lower than you think according to the government.
I think concerning your Trad IRA to Roth, then doing backdoor Roth IRA for both spouses for 2025, and then again for 2026 is a great idea.
Could also consider opening a HSA (if you have proper high deductible plan) and that way, you can contribute $8750 this year. It’s pretax contributions are tax deductible, there’s no tax on growth (until retirement age) and no taxes (are ever) taken on qualified healthcare expenses. I just use it as an investment account; we have like 80k in ours.