While there are income limits as to who is eligible to contribute to a Roth IRA, you can get around them by contributing first to a traditional individual retirement account and then moving some of the money to the Roth from there.
Generally speaking, married people who file jointly may not make a direct contribution to a Roth IRA if their adjusted gross income (AGI) for a particular calendar year exceeds $179,000. The same is true of single taxpayers whose AGI is greater than $122,000.
However, people in both categories may make contributions to a traditional IRA and then move some of the monies to a Roth.
According to the NITP experts, federal employees in the these income categories should take the amount that was deductible and move that to the Roth IRA. The rest of the funds may be safely transferred to a Thrift Savings Plan or, in the case of non-feds, a company 401(k).
There is a graphic that describes your options in this regard on page 5 of the guide.
Leins said that the preferable option is always to contribute directly to a Roth IRA whenever you are eligible to do so.
However, for those whose income is too great, the best option is to first contribute to a traditional IRA. “The millisecond we put that in there,” Liens said, “we can do it. There’s no income ceiling anymore.”
This is the point at which, according to Leins, you divide the funds in your IRAs into two categories. As described on page 6 of the guide, you should transfer the taxable portion of your IRA funds to your TSP, or 401(k), and the non-taxable amount to the Roth account.
Creating a Roth account for the sole purpose of transferring funds to it from a traditional IRA is usually fairly simple, Leins said.
“You go set it up and say the money’s coming from this other source,” he said. “Not everybody will let you do that, but it’s not because it’s illegal.”
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