--- title: How High Income Earners Can Still Contribute to Roth IRAs description: High income earners are still able to contribute to Roth IRAs to be used as part of their retirement income strategy. 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[< Back to read another post](https://www.letsassemble.com/wealth-management-blog) # How High Income Earners Can Still Contribute to Roth IRAs Posted by [ Michael J. O'Connor | CWS®, Vice President Investments](https://www.letsassemble.com/wealth-management-blog/author/michael-j-oconnor) June 25, 2014 - [Tweet](https://twitter.com/share) ![Contribute Roth IRA High Income Earners](https://www.letsassemble.com/hs-fs/file-2476680744-jpg/images/Contribute-Roth-IRA-High-Income-Earners.jpg?width=205&name=Contribute-Roth-IRA-High-Income-Earners.jpg "Contribute Roth IRA High Income Earners")If you have not contributed to a Roth IRA recently because your income is too high and you’re not sure you’re allowed to, read this article. There’s a way you can make non-deductible contributions to a Traditional IRA (non-deductible IRA), then take that money and move it into a Roth IRA. With this method, you can take advantage of the tax-free growth and tax-free withdrawals that a Roth IRA provides.1 There are a few steps to this process, so consulting with your financial advisor and tax professional is a good idea. ### How to Convert Money into a Roth IRA Let’s say your investment portfolio consists of a 401(k) and a taxable brokerage account. You max out your 401(k) every year, and you’re looking for a way to get more tax-free growth out of your investments. You are also interested in a **[retirement income strategy](https://www.letsassemble.com/wealth-management-blog/create-your-retirement-income-strategy-with-an-investment-plan)** that provides you tax-free income (Roth IRA),1 but you cannot contribute to one because you make more than $191,000 (married filing jointly) per year.2 Here’s a strategy that could work for you in this case: you can contribute $5,500 to a non-deductible IRA ($6,500 if you’re over 50),3 then at the end of the year simply have your financial advisor help you convert it into a Roth IRA. Next you would need to **[file form 8606 with the IRS](http://www.irs.gov/pub/irs-pdf/f8606.pdf)** to report the amount of your IRA contribution that was non-deductible, called your “basis” ($5,500 in the example). You have to pay taxes on any converted amount above your basis. Once that is filed and complete, you are left with a Roth IRA growing tax-free with the ability to withdraw tax-free as well.4 This strategy came into existence in 2010 when Congress passed a law allowing anyone—no matter what the income level—to convert assets from an IRA into a Roth IRA. This created a way for high income earners to access Roth IRAs vis-à-vis non-deductible IRAs, since there are no income limits for who can contribute to a non-deductible IRA.1 ### Watch Out For the Pro-Rata Rule When you do a Roth IRA conversion the IRS looks at all of your IRAs combined, also known as the pro-rata rule. Let’s say you have two IRAs - a $45,000 Traditional IRA (all pre-tax contributions) and another Traditional IRA you opened to contribute $5,000 (non-deductible) and convert it to a Roth IRA. 90% of the conversion amount (in this case $4,500) would be considered taxable income. There is a potential way around this which involves moving all your pre-tax IRA assets into your 401(k) account, if the plan allows. After doing so, your only IRA assets would be the non-deductible IRA you want to convert into a Roth.4 Be sure to consult with your tax advisor before starting this process. ### Seek the Help of a Financial Advisor This strategy for converting IRA assets into a Roth is very possible with good planning, but there are also a few important rules to be mindful of. One of our Wealth Managers can help you determine if this could be a good option for you. Call us at 1-800-541-7774 to discuss this strategy with you more. [![Like What You've Read? Subscribe Here!](https://no-cache.hubspot.com/cta/default/10700/5ce6db8c-6757-43bb-831d-b67f40d96a4c.png)](https://cta-redirect.hubspot.com/cta/redirect/10700/5ce6db8c-6757-43bb-831d-b67f40d96a4c)   ---   Sources: 1 [Forbes](http://www.forbes.com/sites/ashleaebeling/2012/01/23/the-backdoor-roth-ira-advanced-version/) 2 IRS.gov 3 [IRS.gov](http://www.irs.gov/Retirement-Plans/Plan-Participant,-Employee/Retirement-Topics-IRA-Contribution-Limits) 4 [About.com](http://moneyover55.about.com/od/iras/a/Using-Non-Deductible-Iras-To-Get-Money-Into-A-Roth.htm)   To the extent this presentation includes any federal tax advice, the presentation is not intended or written by WrapManager, Inc. to be used, and cannot be used, for the purpose of avoiding federal tax penalties. WrapManager, Inc. does not advise on any income tax requirements or issues. Use of any information presented by WrapManager, Inc. is for general information only and does not represent tax advice either express or implied. You are encouraged to seek professional tax advice for income tax questions and assistance. 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