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Ask the Expert: What's the five-year rule for Roth IRAs

You've written that single taxpayers can't contribute to a Roth IRA unless their income is below $140,000 and married taxpayers filing jointly can't contribute to a Roth unless their income is below $208,000. Must this must be earned income? If not, can I contribute to a Roth IRA when my income sources are Social Security and retirement savings? What's the five-year rule for "backdoor" Roth IRAs?

You can’t contribute to a Roth IRA or to a traditional IRA if you don’t have earned income, such as wages, bonuses, commissions, tips or self-employment income. Social Security and income from savings and investments don’t count.

A "backdoor" Roth IRA is an option for people whose earned income is too high to qualify them for Roth contributions, but not for someone without earned income.

Under current law, there's no limit on the amount you can convert from traditional IRAs to a Roth IRA, or on the number of conversions you can do.

A "backdoor" Roth is a two-step strategy: 1) You can make after-tax contributions to a traditional IRA even if your income is too high for pretax contributions, and 2) you can then convert money from the traditional IRA to a Roth IRA.

You must wait five years before you can withdraw converted money penalty-free. The clock starts on Jan. 1 of the year of the conversion; and each conversion starts its own five-year clock. Withdrawals within the first five years of a conversion are subject to a 10% penalty.

But that backdoor may soon close. A proposed congressional bill would eliminate conversions of after-tax dollars from traditional IRAs and 401(k)s at the end of 2021.

The bottom line

You must have earned income to contribute to a traditional IRA or a Roth IRA.

More information

TO ASK THE EXPERT Send questions to Include your name, address and phone numbers. Questions can be answered only in this column. Advice is offered as general guidance. Check with your own consultants for your specific needs.

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