Yes, you might be able to create a Roth individual retirement account (IRA) if you’re over the income limit. This strategy involves converting a traditional IRA to a Roth IRA.
The idea, often referred to as a “backdoor Roth conversion,” is sometimes used by individuals whose incomes exceed the current limits for direct Roth IRA contributions.
Keep in mind that there are pros and cons associated with a backdoor Roth conversion, including tax consequences. This article provides a high-level overview that should be used for informational purposes only. Tax, legal, and accounting professionals can provide more detailed insights about the tax implications of this strategy.
Why Consider a Roth IRA?
Think of a Roth IRA as one piece of your retirement income puzzle. When you peek behind the curtain, here are some of the features that some retirement-minded people consider important:
- Unlike their traditional IRA cousins, required minimum distributions do not apply to original owners of Roth IRAs. That can play a role as you create an estate strategy.
- When retirement rolls around, Roth IRAs can add flexibility to your income strategy since you’ve already paid taxes on that money.
- To qualify for the tax-free and penalty-free withdrawal of earnings, Roth IRA distributions must meet a 5-year holding requirement and occur after age 59½. Tax-free and penalty-free withdrawals can also be made under other circumstances, such as the owner’s death. The original Roth IRA owner is not required to make minimum annual withdrawals.
How Does a Backdoor Roth Conversion Work?
Let’s break down this strategy step by step.
First, you’ll need a traditional IRA. For 2026, you can contribute up to $7,500 or $8,600 if you’re 50 or older. Your contributions may be tax-deductible, depending on your situation, but keep in mind that income limits and other requirements may affect your eligibility.
If you move ahead with a traditional IRA, remember that once you reach the age of 73, you must begin taking the required minimum distributions from a traditional IRA in most circumstances. Withdrawals from traditional IRAs are taxed as ordinary income and, if made before age 59½, may be subject to a 10% federal income tax penalty.
Second, timing matters. One strategy suggests that individuals who convert their traditional IRAs to Roth RIAs sooner rather than later may be more effective in managing their taxes.
Pro tip: The IRS looks at all your traditional IRAs together when calculating taxes on your conversion. This “pro rata rule” means that having existing traditional, SEP-IRAs, or SIMPLE IRAs could affect your tax bill. Your tax, legal, and accounting professionals can provide more detailed insights about how the rule applies in your situation.
SIMPLE IRAs and SEP-IRAs are taxed as ordinary income and follow the same distribution rules and penalties as those of traditional IRAs.
So Much to Consider
Owning a Roth IRA can provide flexibility when creating a retirement strategy and managing an estate. However, similar to any idea, it isn’t one-size-fits-all. Many factors should be considered, including your tax situation, existing IRA balances, and long-term objectives.
If you would like to discuss your individual situation, please give our office a call at 419-872-0204 to review your options.
Citizen Advisory Group is a comprehensive financial services firm that helps Northwest Ohio and Southeast Michigan’s soon to be retired and retired residents effectively plan for and prepare for life’s greatest journey. In addition to helping clients with their finances, Citizen Advisory Group offers monthly health and wellness events.
Please call 419-872-0204 for a complimentary consultation to review your individual situation.
Investment advisory and financial planning services offered through Advisory Alpha, LLC, a Registered Investment Advisor. Insurance, Consulting, and Education services offered through Citizen Advisory Group. Citizen Advisory Group is a separate and unaffiliated entity from Advisory Alpha. While tax and legal issues may be discussed in the general course of financial and investment planning, Advisory Alpha does not provide tax or legal services. Please consult with your tax or legal professional prior to making decisions relative to these issues.
- IRS.gov, November 13, 2025