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ARTICLE · 27 MARCH 2017

Using Nondeductible IRAs To Fund Roth IRAs

Reinhart, Boerner, Van Deuren SC
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This article addresses one narrow planning technique that many people find useful in building Roth IRAs: Forming and funding "nondeductible" IRAs and then converting those nondeductible IRAs to Roth IRAs.

United StatesEmployment and HR
John Herbers
John Herbers
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This is the third in a series of articles relating to estate planning with Roth IRAs.  The first article addressed what Roth IRAs are and why taxpayers should consider incorporating them into their overall financial, tax and estate planning strategy.  The second article described different ways to build a Roth IRA.  An upcoming article will discuss using Roth IRAs as intergenerational wealth transfer vehicles.

This article addresses one narrow planning technique that many people find useful in building Roth IRAs:  Forming and funding "nondeductible" IRAs and then converting those nondeductible IRAs to Roth IRAs.

Taxpayers can open nondeductible IRAs regardless of their income level.  Deductible IRAs are only allowed for taxpayers with specified income levels and who do not participate in an employer‑sponsored retirement plan.  These income levels and nonparticipation in employer sponsor retirement plans do not apply for contributions to nondeductible IRAs.

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