Retirement contributions

[Marcia]

I have a client who is under 50 and whose income for 2019 is between 120,000-137,000. She has the maximum deducted for her 401K. Is she able to contribute to a Roth IRA? I know maximum contribution is $6,000.00 and there is also also a phase out due to her income.
Should she wait and make her contribution before April 15. Her investment guy from work could not advise her what to do

[kathyc2]

I would have her wait until you calculate her return. That way you can tell her the max she can contribute due to phaseouts.

[bluetaxman]

Saw a worksheet on 13-12 of the 2019 Tax Book.

[ATSMAN]

Because of the MAGI phaseout rules, it is prudent to tell your client to wait and get the tax return completed first. For a single taxpayer the phaseout begins $122K to $137K.

I have noticed that financial product salespeople really don't pay attention to the phaseout rules most of the time.

[terryats]

Your client could make what is known as a back door ROTH. You can google it to read about it. Basically you make the full $6000 to a traditional IRA, then roll it over to a ROTH. You are only allowed to do this once a year

[kathyc2]

Your client could make what is known as a back door ROTH. You can google it to read about it. Basically you make the full $6000 to a traditional IRA, then roll it over to a ROTH. You are only allowed to do this once a year

Back door only works if there is no other amounts in deductible IRA's.

[terryats]

That is why I advised him to look up backdoor ROTH's.

[kathyc2]

That is why I advised him to look up backdoor ROTH's.

Unfortunately, most of the articles you get by googling them do not point this out.

[terryats]

here is a good article from the balance, that explains the rules in a straight forward manner with examples, but I would would still advise studying the official IRS rules.

https://www.thebalance.com/using-non-deductible-iras-to-get-money-into-a-roth-ira-2388699

[kkuch]

You could do a backdoor Roth because the deductible amount of a traditional IRA will be zero. Client made over 74k and is covered by a pension plan at work. I don't understand why there are income limits on Roth IRA's with this workaround? Aren't taxes so much fun!!

[kathyc2]

You could do a backdoor Roth because the deductible amount of a traditional IRA will be zero. Client made over 74k and is covered by a pension plan at work. I don't understand why there are income limits on Roth IRA's with this workaround? Aren't taxes so much fun!!

If there is other money in a deductible IRA the "backdoor" would need to be prorated. I believe the intent of Roth legislation was to limit contributions for higher income people. Like so many laws people find a way to legally get around the intent.