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Ask the Expert: Contributing, converting Roth IRA after age 70 1/2

Understanding how and when to create a Roth

Understanding how and when to create a Roth IRA or a traditional IRA are key to maximizing savings, experts say. Credit: Getty Images iStockphoto / designer491

Can I contribute to my Roth IRA after age 70 12? Can I convert my tax-deferred accounts — which all require minimum distributions (RMDs) after age 70 12 — to my Roth IRA?

You can contribute to a Roth IRA at any age, provided 1) you have earned income, and 2) your modified adjusted gross income (the combined amounts on line 37 and line 8b of Form 1040) is less than $133,000 if you’re a single taxpayer, or $196,000 if you’re married filing jointly.

You can convert a traditional tax- deferred IRA to a Roth IRA at any age, regardless of your income. But first, consult a tax adviser about how a conversion would affect your finances. There are many factors to consider.

The advantages: A Roth IRA grows tax-free and has no RMDs. You can withdraw Roth principal tax-free any time after the conversion, and withdraw its earnings tax-free after you’re 59 1⁄2 and have owned the account for five years. Also, Roth distributions aren’t considered income in the calculation that determines the tax on your Social Security benefit.

The cost: The converted amount is added to your taxable income. That increases your current tax bill. It also may push you into a higher tax bracket for the year, which can reduce or eliminate your eligibility for deductions and credits, and temporarily increase your future Medicare premium. A tax adviser can walk you through how to do a series of annual Roth conversions small enough not to boost your tax bracket.

Consider, too, how soon you’ll need this money. Ideally, the Roth’s future earnings will outstrip the cost of conversion. But that happy outcome depends partly on how many years you can let it grow untouched.

The bottom line: Consult a tax adviser before doing a Roth IRA conversion.

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