Roth conversion income does NOT count against your MAGI in order to determine your ability to contribute directly to a ROTH IRA.

I did not know this! Ole Ben from Texas shared that information with me. So I knew I needed to share it with you too.

Folks, this just proves the point, NO ONE can possibly know everything when it comes to financial planning. And when it comes to YOUR specific situation, no one cares more about it than YOU.

Thus, while relying on folks in the business is a good idea, man, oh man, you’ve got to take care of number 1 first. And that’s you!

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LEARN MORE ABOUT: IRA Accounts

INVESTING IN A GOLD IRA: Gold IRA Account

INVESTING IN A SILVER IRA: Silver IRA Account

REVEALED: Best Gold Backed IRA

As you plan for your retirement, it’s essential to understand the contribution limits for Roth IRAs and how your income can affect your eligibility to contribute to them.

In 2021, the contribution limit for Roth IRAs is $6,000 for individuals under age 50 and $7,000 for individuals who are 50 and older. Keep in mind that this limit applies to your total contributions to all IRAs you own, including Traditional and Roth IRAs.

However, not everyone is eligible to contribute the maximum amount to a Roth IRA. Your modified adjusted gross income (MAGI) plays a significant role in determining your contribution limit.

MAGI is calculated by taking your adjusted gross income (AGI) and adding back in any tax-exempt income you earned, such as interest from municipal bonds. Certain deductions, such as student loan interest and IRA contributions, can also affect your MAGI.

For 2021, the Roth IRA contribution limit begins to phase out for individuals with a MAGI of $125,000 and married couples filing jointly with a MAGI of $198,000. Once your MAGI surpasses these limits, your contribution limit will gradually decrease until you become ineligible to contribute at all.

Here’s a breakdown of how MAGI affects Roth IRA contribution limits for single and married individuals in 2021:

– Single individuals with a MAGI of $125,000 or less can contribute up to the full $6,000 ($7,000 if they’re over 50).
– Single individuals with a MAGI between $125,000 and $140,000 can make a reduced contribution.
– Single individuals with a MAGI over $140,000 are not eligible to contribute to a Roth IRA.
– Married couples filing jointly with a MAGI of $198,000 or less can contribute up to the full $6,000 ($7,000 if they’re over 50) each.
– Married couples with a MAGI between $198,000 and $208,000 can make a reduced contribution.
– Married couples with a MAGI over $208,000 are not eligible to contribute to a Roth IRA.

It’s important to note that you have until the tax filing deadline, generally April 15th of the following year, to make contributions for the previous year. This gives you some flexibility if you’re unsure of your MAGI, as you can calculate it when preparing your tax return and then make contributions if you’re eligible.

If you contribute too much to a Roth IRA for a given year, you may face penalties and taxes. It’s essential to keep track of your contributions and your MAGI to ensure you don’t exceed your limits.

In conclusion, understanding Roth IRA contribution limits and how MAGI affects them is critical for successfully planning for your retirement. Keep these limits in mind as you make contributions to ensure you’re staying within the rules and maximizing your savings potential.