Make Too Much to Contribute to a Roth IRA? Here’s What to Do Now


You’ve heard it over and over again as someone looking for good advice on growing wealth:

Contribute to a Roth IRA now when you’re younger, because you’ll probably be in a higher tax bracket later!

That could be true, because it’s reasonable to expect you’ll earn more as you advance through your career and gain more experience.  The more you earn, the more you’ll pay in taxes, and Roths are helpful because the money you withdraw is tax free.

That means you’d pay less in taxes if you paid those taxes today on your Roth contributions (as opposed to other tax-advantaged accounts, like 401(k)s, where you don’t pay today but you do pay upon withdrawal in the future).

But “contribute to a Roth IRA” is not helpful advice at all if you can’t use a Roth in the first place. Roth IRAs come with income caps. For 2019, you can’t contribute to a Roth IRA if you’re single and your modified adjusted gross income is $137,000 or if you’re married and your MAGI is $203,000.

How to Get Around the Income Limits on Roth IRAs

Yes, there is. At least there is if you’re considering contributing to a Roth in the usual way (by pulling up your account and making a contribution).

But there are ways to get money into a Roth, even if you’re over the income limit… and there are also things to do with your money if you find you make too much to contribute normally.

Let’s look at how you can continue putting money into your Roth even if you make over $137,000 (or $203,000 as a married couple). That would be through a backdoor Roth conversion.

To do this, you’d contribute money to a traditional IRA, and then roll it over into a Roth IRA. This allows you to get money into a Roth even if you make over the income limit. There are pros and cons to doing this, and you’ll want to take into account the taxes you’ll need to pay on the rollover.

You’ll want to talk to (and work with) a financial planner before you do this. Making a mistake here could cost you big-time when it comes to taxes (and that’s in addition to what you’ll pay no matter what when you convert from a traditional to Roth IRA).

Plus, it simply may not be the right move to make, depending on your situation. A planner can help you evaluate your options and choose the best one.

In the meantime, you can also look at a few other steps to take if you make too much to contribute to a Roth IRA.

Where to Put Your Money If You Make Too Much to Contribute to a Roth IRA

There are many other things you can do with money available to save and invest than put it in a Roth IRA, so don’t get too hung up on the fact you can’t contribute normally anymore!

Why? For starters, Roth IRA contributions are low anyway. You can only save $6,000 per year if you’re under age 50, and as someone looking to accumulate and work their wealth you need to save far more than that per year.

You could easily stash that cash in another investment account, like a taxable brokerage account. No, you won’t enjoy as big of tax advantage seeing as you don’t get a tax break here at all. But that may not matter so much when you consider the tradeoff.

Remember, Roth IRAs are retirement accounts. They come with a lot of rules and stipulations around what you can do with the money you save there and when you can access it (without penalty).

A taxable brokerage account, on the other hand, allows you a lot more freedom and flexibility. You’ll want to invest here especially if you’re aiming for early retirement, so you can access your savings when you need to without facing fees for doing so before an official retirement age.

And don’t forget about your 401(k). If you’re not maxing that out, don’t worry about your Roth: contribute up to the limit in this retirement plan instead. You can contribute up to $19,000 in 2019.

Depending on your goals and financial situation, there are other investment vehicles to explore, too. You might want to invest in your business or in real estate.

If you want to evaluate what might be best when “Roth IRA” is no longer the default option, let’s chat about the best money moves you can make to work your wealth — and increase your net worth.

Mary Beth Storjohann, CFP® is an author, speaker, and financial coach who takes a fun, no-nonsense approach in working with individuals and couples across the country, helping them make smart choices with their money.

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