Q&A: Are There Any Restrictions on How Much or Who Can Convert to Roth?

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Most people familiar with individual retirement accounts (IRAs) know about the various contributions limitations.

You are limited to the annual contribution limit or your earned income, whichever is smaller. Furthermore, whether you can make pre-tax deductible contributions to your traditional IRA or post-tax contributions to your Roth IRA are limited by modified adjust income (MAGI) phase-out lines. For many years, those over a certain age couldn’t make traditional IRA contributions, although the 2019 SECURE Act removed that.

So, it is no surprise that we received the following reader question:

Are there any limits (age, income level etc) on your annual Roth conversation amount?

Fortunately for those who are utilizing the backdoor Roth strategy, there are no such limitations on Roth conversions. Taxpayers of any income level, age, and employment or retirement status can convert their pre-tax individual retirement assets to Roth IRA.

The most you can convert to Roth in one year is all of the pre-tax assets which you have available to convert. For example, employer retirement plan assets which are not yet vested or are not permitted for rollover based on your service status likely cannot be converted this year. However, SEP-IRAs, IRA rollovers, traditional IRAs, and nondeductible contributions are all eligible for immediate or later Roth conversion.

On their website, the IRS has what they call the “Rollover Chart.” You can see the latest one on the IRS Website here and a saved copy of today’s IRS Rollover Chart here. If you skim down the Roth IRA column, you can see that each listed “Roll From” account type has a “Yes” in the “Roll To Roth IRA” column. These are the assets which can be converted to a Roth IRA.

Roth conversions are taxable in the year you convert them. Even though large conversions may create large tax bills, there are still many reasons you may want to convert a large amount of IRA money to Roth IRA all in one year.

Also, even though large Roth conversions will increase your AGI, it luckily leaves your MAGI unaffected for the purposes of calculating Roth contribution limits. This means that if you can contribute to your Roth IRA directly you can do so even in years you are doing massive Roth conversions.

Photo by Michaela Baum on Unsplash

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Chief Operating Officer, APMA®

Megan Russell has worked with Marotta Wealth Management most of her life. She loves to find ways to make the complexities of financial planning accessible to everyone. She is the author of over 700 financial articles. Her most popular post is "The Complete Guide to Your Washing Machine" while one of her favorites is "Funding a 3-Year-Old’s Roth IRA."