Navigating Roth IRA Eligibility
Are you eligible to put money in a Roth IRA? Download our Roth IRA Contribution Guide.
A Roth IRA is a great option for those looking to save after-tax dollars, offering the opportunity for tax-free growth, and favorable distribution rules. Unlike traditional IRAs, Roth contributions are made with money you've already paid taxes on, but the payoff comes in retirement when you can withdraw both contributions and earnings completely tax-free. This makes Roth IRAs particularly attractive for younger savers or those expecting to be in higher tax brackets in retirement.
Unfortunately, eligibility to contribute to a Roth IRA is subject to multiple restrictions, which can cause confusion when determining if you are eligible to contribute. The IRS has established income limits and other requirements that can prevent high earners from making direct contributions.
The tax-free growth potential means decades of compound earnings can be withdrawn without any tax liability in retirement. Additionally, Roth IRAs don't have required minimum distributions during your lifetime, making them excellent estate planning tools. You can also withdraw contributions (but not earnings) at any time without penalty.
Eligibility involves several factors that must align: sufficient earned income, staying within income limits, and coordinating with any traditional IRA contributions. High earners who exceed income limits can still use the "backdoor Roth" strategy, which involves making non-deductible traditional IRA contributions and converting them to Roth IRAs.
To help make the analysis easier for you, we’ve included a “Can I contribute to my Roth IRA?” flowchart. It addresses the key eligibility considerations including earned income, other IRA contributions, and income thresholds.
Download our Roth IRA Contribution Guide here.
While checklists and flowcharts can help you identify different opportunities, we are always available to meet with you to discuss your financial needs and goals, and help to identify what the best opportunities are for you.
Want to learn more about private wealth planning?
This content is provided by Windward Private Wealth Management Inc. (“Windward” or the “Firm”) for informational purposes only. Investing involves the risk of loss and investors should be prepared to bear potential losses. No portion of this blog is to be construed as a solicitation to buy or sell a security or the provision of personalized investment, tax or legal advice. Certain information contained in the individual blog posts will be derived from sources that Windward believes to be reliable; however, the Firm does not guarantee the accuracy or timeliness of such information and assumes no liability for any resulting damages.
Windward is an SEC registered investment adviser. The Firm may only provide services in those states in which it is notice filed or qualifies for a corresponding exemption from such requirements. For information about Windward’s registration status and business operations, please consult the Firm’s Form ADV disclosure documents, the most recent versions of which are available on the SEC’s Investment Adviser Public Disclosure website at www.adviserinfo.sec.gov.