Roth IRAs for High Income Earners

Roth IRAs Are Still Available for High Income Earners

Physicians cannot contribute to Roth IRAs? They make too much money, RIGHT?  WRONG!  While it’s true that most physicians, other than through their employer-sponsored retirement plan, cannot contribute directly to an individual ROTH IRA, there is another way…

HOW? You can do this through a process sometimes referred to as the “Back Door” Roth IRA contribution or conversion.  This occurs when a high-income earner not ordinarily able to contribute to a ROTH IRA (you can’t make over $203,000 adjusted gross income) does so in the following manner: First, non-qualified contributions are made to a traditional IRA; THEN, a taxable conversion of the traditional IRA to a Roth IRA takes place.  

There’s nothing that complicated about the conversion – it’s mostly just paperwork, but there are some administrative rules to follow. It’s also not the best option in every scenario (for example, if you’ll need the money in less than five years), but it’s a strategic instrument you can leverage to help you max out your retirement savings efforts and minimize your tax burdens.

If you’re curious to learn more about backdoor Roth IRAs or how you can save more tax-advantaged money for retirement, give us a call.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. LPL does not provide tax advice. The Roth IRA offers tax deferral on any earnings in the account. Withdrawals from the account may be tax-free, as long as they are considered qualified. Withdrawals prior to age 59.5 or prior to the account being opened for 5 years, whichever is later, may result in a 10% IRS penalty tax. Future tax laws can change at any time and may impact the benefits of Roth IRAs. This information is not intended to be a substitute for individualized tax advice. Please consult your tax advisor regarding your specific situation.