Can I Contribute the Max to Both My IRA and Roth IRA, Then Convert in the Same Year? For the full podcast episode, transcript and show notes, visit On the Your Money, Your Wealth® podcast, Joe Anderson, CFP® and Big Al Clopine answer this question from Lenny in Michigan: "Hello I am wondering can I make a $5500 contribution to both my IRA and to my Roth IRA in the same year? If so, later that same year can I convert the IRA to my Roth IRA and pay the tax for the IRA?" Listen to the podcast: JA: We got Lenny from Michigan. “Hello my name is Lenny. Do you have a penny?” Anyone remember that? AL: Nope. AC: No. Nothing. JA: Really? Good Times. Remember? The guy would open up his jacket and then he would have TV's and watches? AC: (laughs) I'm sure you're right. AL: I didn't watch it, sorry. JA: Good Times? J.J.? AC: Yeah I remember J.J. but I probably watched that show for like two minutes. JA: Janet Jackson was on the show. I loved Good Times. And I believe it was in the projects of Detroit. So maybe this is Lenny from Good Times. "Hello." He's wondering, "can I make a $5500 contribution to both my IRA and my Roth IRA in the same year? If so, later that same year, can I convert the IRA to my Roth IRA and pay the tax on the IRA?" Lenny, I like where your head's at. You want to double dip the program, don't you? You want to go 55 Roth 55 IRA then you're like, "You know what, I'm going to convert the 55 into my Roth and call it $11,000 bucks into the Roth in one single year." AC: It's a great idea. The answer is no, you cannot do that. You can mix or match. The combination of the Roth and the regular IRA can be no more than $5,500 unless you're 50 and older, then it's $6,500. JA: Yeah. And if you want to do IRA, Roth IRA, you can do both, but the maximum is $5,500. So you could split it up, you could say $1,000 into the Roth, you can put $4,500 bucks into the regular IRA, vice versa, whatever but it's only $5,500. AC: Here's what you can do though, it's November right now as we're recording this, so go ahead and do your contribution for 2018 and in January do your contribution for 2019, so you can really double up in a short period of time. JA: Yeah, but he's still wanting to probably do that every single year to get the $11,000 bucks is probably what he's thinking. AC: I understand it but this is a way to fast track. JA: Yeah. Lenny if you've got a 401(k) plan, that's where you would convert the 401(k) into your Roth. So you can have a Roth IRA and a 401(k) plan, it's not one or the other like here. So you could put in the $18,500 into your 401(k) plan, still $5,500 into the Roth, and if you want to convert some of the money from the 401(k) plan and move it into the Roth IRA, you can legally by law, but then you have to look at your plan document to see if you can get money out of that 401(k). AC: Yeah. And if your 401(k) has a Roth option, you can just do that do it that way. So you get $18,500 in a Roth 401(k) and another $5,500 in a Roth IRA. JA: So there you go Lenny, hopefully, that helps. Pure Financial Advisors, LLC is a fee-only Registered Investment Advisor providing comprehensive retirement planning services and tax-optimized investment management to thousands of people across the nation. Schedule a free assessment with any one of our experienced financial professionals: Office locations: Ask Joe & Big Al On Air: Subscribe to our YouTube channel: Subscribe to the Your Money, Your Wealth® podcast: IMPORTANT DISCLOSURES: • Investment Advisory and Financial Planning Services are offered through Pure Financial Advisors, Inc. A Registered Investment Advisor. • Pure Financial Advisors Inc. does not offer tax or legal advice. Consult with a tax advisor or attorney regarding specific situations. • Opinions expressed are subject to change without notice and are not intended as investment advice or to predict future performance. • Investing involves risk including the potential loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of declining values. • All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. • Intended for educational purposes only and are not intended as individualized advice or a guarantee that you will achieve a desired result. Before implementing any strategies discussed you should consult your tax and financial advisors. #YourMoneyYourWealth #YMYW #YourMoneyYourWealthPodcast...(read more)
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The question of whether one can max out contributions to both a Roth IRA and a traditional IRA in the same year and then convert them has been a topic of discussion for many people. In this article, we will explore the answer to this question, and how it can affect your retirement savings plan. First, it is important to understand the differences between a Roth IRA and a traditional IRA. A traditional IRA allows you to make contributions with pre-tax dollars, and the money grows tax-deferred until you withdraw it during retirement. On the other hand, a Roth IRA allows you to make contributions with after-tax dollars, and the money grows tax-free until you withdraw it during retirement. Now, the question is whether it is possible to max out contributions to both accounts and then convert them. The short answer is yes, you can. However, there are a few things you should keep in mind before doing so. First, it is essential to ensure that you are eligible to contribute to both accounts. For 2021, the maximum contribution limit for both Roth and traditional IRAs is $6,000, with an additional $1,000 catch-up contribution for those aged 50 or older. However, there are income limits that affect your ability to contribute to a Roth IRA. For example, if your modified adjusted gross income (MAGI) for 2021 is over $140,000 as a single filer or $208,000 as a married filing jointly, you are not allowed to contribute to a Roth IRA. Secondly, if you plan to convert both accounts, you will need to ensure that you have the funds available to pay taxes on any pre-tax dollars in the traditional IRA account. When you convert traditional IRA dollars to Roth IRA dollars, the amount you convert is considered taxable income for the year in which you made the conversion. Finally, it is essential to ensure that converting both accounts makes sense for your overall retirement savings plan. Depending on your current tax rate and your anticipated tax rate during retirement, it may be more beneficial to max out contributions to only one account. In summary, it is possible to max out contributions to both a Roth IRA and a traditional IRA and convert them in the same year. However, it is crucial to ensure that you are eligible to contribute to both accounts, have the funds to pay taxes on any pre-tax dollars in the traditional IRA, and that converting both accounts aligns with your overall retirement savings plan. As always, it is recommended to consult with a financial advisor to determine the best course of action for your specific situation. https://inflationprotection.org/can-i-max-contributions-to-roth-ira-traditional-ira-and-convert-in-the-same-year-ymyw-podcast/?feed_id=77008&_unique_id=640b7287a7c1c #Inflation #Retirement #GoldIRA #Wealth #Investing #2018rothiramaxcontribution #401k #401kconversiontorothira #401kinvesting #convertingiratoroth #convertingiratorothirataxconsequences #InvestingforRetirement #iracontribution #iracontributionlimits2018 #IRAconversion #irataxes #retirementplanning #retirementstrategies #RothIRA #rothirainvestmentoptions #rothiraoptions #rothirastrategy #rothirataxrules #rothiravstraditionalira #traditionalIRA #YourMoneyYourWealth #TraditionalIRA #2018rothiramaxcontribution #401k #401kconversiontorothira #401kinvesting #convertingiratoroth #convertingiratorothirataxconsequences #InvestingforRetirement #iracontribution #iracontributionlimits2018 #IRAconversion #irataxes #retirementplanning #retirementstrategies #RothIRA #rothirainvestmentoptions #rothiraoptions #rothirastrategy #rothirataxrules #rothiravstraditionalira #traditionalIRA #YourMoneyYourWealth
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