"I Make Too Much to Contribute to a Roth IRA"—Think Again

If you’ve ever thought this, you’re not alone. A lot of high earners believe that once their income crosses a certain threshold, Roth IRA contributions are off the table.

Here’s the thing: That’s a myth.

Anyone—yes, even high-income earners—can contribute to a Roth IRA. It just takes a little extra strategy.

Let me break it down for you. There’s a perfectly legal workaround that allows you to fund a Roth IRA at any income level. It’s called the Backdoor Roth IRA, and it’s one of the most powerful tools available to high earners who want to grow tax-free wealth for the future.

Let’s dive into:

• Roth IRA income limits

• Contribution limits

• What the Backdoor Roth IRA is

• And how to do it the right way

Income Limits: Who Can Contribute Directly to a Roth IRA?

If your modified adjusted gross income (MAGI) is under $146,000 (single) or $230,000 (married) in 2024, congrats—you’re eligible to contribute directly to a Roth IRA.

But here’s the kicker: If your income exceeds those limits, you’re out of luck for direct contributions.

This is where the Backdoor Roth IRA comes into play. If you make more than $146,000 (single) or $230,000 (married), you’ll want to get familiar with this strategy.

Contribution Limits

In 2024, you can contribute up to $7,000 to a Roth IRA or Backdoor Roth IRA ($8,000 if you’re 50 or older). That’s up from $6,500 in 2023.

It may not seem like a huge amount, but when you consider the tax-free growth over decades, it’s absolutely worth it.

What Is a Backdoor Roth IRA?

Let’s clear something up: A Backdoor Roth IRA isn’t a special type of account—it’s a strategy.

Here’s how it works:

1. You contribute to a traditional (non-deductible) IRA.

2. You convert those funds into a Roth IRA.

3. Boom! You’ve successfully contributed to a Roth IRA, no matter how much you earn.

Step-by-Step Guide to the Backdoor Roth IRA

1. Contribute to a Traditional IRA
   Open a traditional IRA and contribute up to the annual limit ($7,000 for 2024, $8,000 if you’re 50+).

2. Convert the Traditional IRA to a Roth IRA
   Transfer the funds from the traditional IRA into a Roth IRA. The key here? Don’t deduct the traditional IRA contribution on your taxes.

3. Report the Conversion on IRS Form 8606
   This form tells the IRS that you’ve made a non-deductible contribution and completed the conversion.

Pro Tip: You have until tax day of the following year—April 15, 2025—to complete your 2024 Backdoor Roth IRA.

Avoiding the Pro-Rata Rule

Here’s where it can get tricky: If you have other pre-tax IRA accounts (traditional, SEP, SIMPLE), the IRS considers all your IRAs when calculating taxes on the conversion.

For example:

• Let’s say you have $7,000 in a non-deductible IRA and $7,000 in a pre-tax IRA.

• When you do a Backdoor Roth, the IRS says 50% of the conversion is taxable because half of your total IRA balance is pre-tax.

To avoid this, roll over any pre-tax IRA balances into your 401(k), 403(b), or similar plan before December 31 of the conversion year. This keeps the pro-rata rule from messing up your strategy.

Why Backdoor Roth IRAs Are Worth It

Backdoor Roth IRAs are an absolute game-changer for high earners. Tax-free growth is rare, and this strategy lets you take full advantage of it—even if you’re well above the income limits.

But here’s the thing: You’ve got to do it right. Small mistakes, like forgetting about the pro-rata rule, can cost you big time.

Final Thoughts

If you’re serious about building wealth and minimizing taxes, the Backdoor Roth IRA is a no-brainer. It’s simple, effective, and one of the best ways to secure your financial future.

Don’t let the “I make too much” myth hold you back. Take control, follow the steps, and get more tax-free dollars working for you.

And if you’re not sure how to get started or have existing IRA balances complicating things, let’s talk. This is exactly the kind of thing we help clients with at Black Mammoth.

Let’s make sure you’re doing it right and setting yourself up for long-term success.