My wife and I have employer sponsored 401k plans. We hit the maximum permissible AGI of $188,000 and technically cannot contribute to an IRA account.

I also do some investments in stocks and funds and would like to use Roth IRA to do the same. Since we are not allowed to contribute to an IRA, is there a way I can contribute to an IRA as non-deductible and then convert it to Roth IRA?

1 Answer 1


From the way you frame the question it sounds like you more or less know the answer already.

Yes - you can make a non-deductable contribution to a traditional IRA and convert it to a Roth IRA.

Here is Wikipedia's explanation:

Regardless of income but subject to contribution limits, contributions can be made to a Traditional IRA and then converted to a Roth IRA.[10] This allows for "backdoor" contributions where individuals are able to avoid the income limitations of the Roth IRA. There is no limit to the frequency with which conversions can occur, so this process can be repeated indefinitely.

One major caveat to the entire "backdoor" Roth IRA contribution process, however, is that it only works for people who do not have any pre-tax contributed money in IRA accounts at the time of the "backdoor" conversion to Roth; conversions made when other IRA money exists are subject to pro-rata calculations and may lead to tax liabilities on the part of the converter. [9]

Do note the caveat in the second paragraph. This article explains it more thoroughly:

The IRS does not allow converters to specify which dollars are being converted as they can with shares of stock being sold; for the purposes of determining taxes on conversions the IRS considers a person’s non-Roth IRA money to be a single, co-mingled sum.

Hence, if a person has any funds in any non-Roth IRA accounts, it is impossible to contribute to a Traditional IRA and then “convert that account” to a Roth IRA as suggested by various pundits and the Wikipedia piece referenced above – conversions must be performed on a pro-rata basis of all IRA money, not on specific dollars or accounts.

Say you have $20k of pre-tax assets in a traditional IRA, and make a non-deductable contribution of $5k. The account is now 80% pre-tax assets and 20% post-tax assets, so if you move $5k into a Roth IRA, $4k of it would be taxed in the conversion. The traditional IRA would be left with $16k of pre-tax assets and $4k of post-tax assets.

  • essentially means that if you have $10,000 in IRA, you cannot opt for $5500. Right ?
    – vsingh
    Commented Feb 6, 2014 at 20:02
  • Not sure I understand your wording? I'll add an example to try to try to clarify. Commented Feb 6, 2014 at 20:15
  • Got it. Understand it now with example!
    – vsingh
    Commented Feb 6, 2014 at 20:49
  • 1
    @Daniel - your math looks right, but careful on "non-deductable contribution of $10k" as the limit this year is $5500. so you're either talking 2 year's deposits, or mixing the spouse account as well. The 'non-deducted' sum doesn't change, but the pretax funds grow, hopefully. So the tax-free conversion is proportionate to the amount in the account that's considered post tax. Commented Feb 6, 2014 at 22:59
  • @JoeTaxpayer good point. I changed the numbers in the example. Commented Feb 6, 2014 at 23:25

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