For federal employees a Roth IRA can be an excellent way to save for retirement. The money you put into a Roth IRA grows without being taxed and when you retire you can withdraw it without paying taxes.
Plus you can pass on any remaining funds to your loved ones without them being taxed either. But for high earners there can be challenges as income limits might stop them from directly contributing to a Roth IRA. Do not worry there are still ways to fund your Roth IRA.
Income Limits for Roth IRA Contributions
Roth IRAs have a rule that limits who can contribute based on income. If your income is too high you may not be able to contribute directly. In 2024 the contribution limits for Roth IRAs are:
Filing Status | MAGI Limit | Contribution Limit |
Single or Head of Household | $138,000 | $7,000 (under 50), $8,000 (50 or older) |
Married Filing Jointly | $218,000 | $7,000 (under 50), $8,000 (50 or older) |
If your income is above these limits you can not contribute directly to a Roth IRA. However there are still other ways to fund your Roth IRA.
Roth IRA Conversion
If you have a traditional IRA you can convert it to a Roth IRA no matter how much you earn. The only catch is that you will have to pay taxes on the money you convert since it has not been taxed yet. Once converted the money in your Roth IRA will grow tax free.
Stay informed about tax rules and inheritance laws, especially if you plan to pass down a Roth IRA. Understanding the Big Changes for Inherited IRAs in 2025: Avoid Costly Penalties can help your beneficiaries avoid unexpected tax burdens.
Backdoor Roth IRA
Another method is the backdoor Roth IRA. With this option you make a nondeductible contribution to a traditional IRA and then convert that money to a Roth IRA. There are no income limits for this process but you must have earned income to make the initial contribution.
However there is a rule called the “pro-rata rule” that can make this a bit tricky if you have other deductible traditional IRA funds. If you have previously contributed to a deductible traditional IRA part of the money you convert may be taxable. You will need to use IRS Form 8606 to figure out how much is taxable.
For instance Stephanie and Jason both have incomes that are too high to contribute directly to a Roth IRA in 2024. But they can each use the backdoor method. Stephanie has no deductible traditional IRA funds so her conversion will be tax-free. Jason on the other hand has before-tax funds in his traditional IRA so part of his backdoor Roth IRA conversion will be taxable.
FAQs
Can I convert any IRA to a Roth IRA?
Yes, you can convert any traditional IRA to a Roth IRA. There are no income limits for Roth conversions.
Do I have to pay taxes on a Roth IRA conversion?
Yes, when you convert a traditional IRA to a Roth IRA, you must pay taxes on the amount converted, since it was not taxed before.
What’s the backdoor Roth IRA?
A backdoor Roth IRA allows you to contribute to a traditional IRA and then convert it to a Roth IRA, even if your income is too high for direct Roth contributions.