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What to consider before a Roth IRA conversion

Roth IRA accounts can offer you a number of benefits – including tax-free income in retirement. This can put you at a significant advantage, given that tax rates are expected to rise in the future – and nobody knows how high they will go! Unfortunately, not everyone qualifies for a Roth IRA, though. So, it is important to know whether or not you can set up one of these accounts – and if not, what alternate strategies are available to you, along with what you should consider before a Roth IRA conversion if you decide to go that route.

Are You Eligible for a Roth IRA?

One of the eligibility criteria for opening and funding a new Roth IRA is linked to the amount of income that you currently bring in, as well as the way in which you file your income tax return. For 2022, the Roth IRA income limits are as follows:

Roth IRA Income Limits (for 2022)

For single tax filersPhase-out starts at $129,000

Ineligible at $144,000

For married couples filing jointly and for qualifying widow(er)sPhase-out starts at $204,000

Ineligible at $208,000


Even if you currently earn too much to qualify for opening a Roth IRA, though, there may still be ways to take advantage of this type of account. One is via a Roth IRA conversion.

Strategies for Taking Advantage of Roth IRAs – Even If You Earn “Too Much”

A Roth IRA conversion – which is sometimes also referred to as a “back door IRA” – consists of taking assets from a traditional IRA account and moving them over (or “converting” them) to a Roth. Currently, anyone – regardless of how much income they presently earn – is allowed to take part in a Roth IRA conversion. In addition, there is no limit on the amount of money that can be transferred over from the traditional IRA account. Going forward, once you have a Roth IRA in place, you may be able to make annual contributions into the account. At this time (in 2022), you can contribute up to $6,000 if you are age 49 or under, and an additional $1,000 in “catch up” contribution if you are age 50 or over.

Roth IRA Annual Maximum Contribution Limits (for 2022)

Age 49 and younger$6,000
Age 50 and over$7,000


Does the “Cost” of an IRA Conversion Outweigh the Future Benefits?

Converting from a taxable traditional IRA over to a tax-free Roth IRA account can end up “costing” you in taxes for the year(s) in which the conversion is made. So, in addition to considering the Roth IRA income limits and the amount of the annual maximum contribution, it is also important to compare what you will have to pay in taxes now versus what you could end up saving yourself in tax payments down the road at the time of withdrawal. Yet, with today’s historically low tax rates, a Roth IRA conversion could make a lot of sense. Another nice feature with regard to the Roth IRA is the fact that there are no required minimum distributions (RMDs) like there are with traditional IRAs and retirement plans. Therefore, once you turn age 72, you will not have to start making IRS-mandated withdrawals from the Roth account – allowing it to continue generating tax-free growth.

Still Have Questions About Roth IRAs or Retirement Income Strategies?

A Roth IRA can provide you with a great way to secure tax-free income in retirement. In doing so, there may also be strategies for setting up one or more income streams that will last for the remainder of your lifetime, no matter how long that may be. So, if you still have questions about generating income in retirement, contact us and chat with one of our retirement income specialists. At Annuity Gator, our primary focus is on educating consumers – as well as financial professionals – on retirement income strategies, including the use of annuities. To get your questions answered or to learn more about generating an income stream for life, feel free to contact us at (888) 440-2468 or by sending us an email through our secure online contact form. We look forward to hearing from you.
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