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The Roth IRA – Now Available to (Almost) Everyone

Posted by Jamie Downey  January 8, 2010 07:12 AM

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A little over three years ago, my wife made the wisest decision in her life: she married me.  I must admit, this event also worked out pretty well for me.  However, subsequent to our nuptials, I no longer qualified to fund my Roth IRA (my wife is a highly compensated public school teacher).  This all came to an end yesterday when I funded what is known as a “back-door” Roth IRA.


A few years ago, President Bush signed the “Tax Increase Prevention and Reconciliation Act of 2005”.  One of the beautiful parts of this legislation was the ability for anyone to convert a Traditional IRA to a Roth IRA.  This clause of the legislation became effective starting January 1, 2010. 


Yesterday I executed the “back-door” Roth IRA strategy.  This eliminates the income limitations and allows almost anyone the ability to fund a Roth IRA.  While I had known about this process, it sounded as though it was a bit convoluted and would take some time.  In the end, neither of these concerns had any justification.  I had an existing account at T. Rowe Price and completed the process online.  The entire process took me less than 15 minutes. 


Here is how the process works:


Step One: Fund a Traditional IRA.  Almost anyone under the age of 70 ½ can fund a Traditional IRA.  There are income limits on these being deductible. But we don’t want to make a deductible contribution anyway.  You can put $5,000 into the Traditional IRA per annum ($6,000 if you are 50 or older.)  If you act now, you can fund for both the 2009 and 2010 tax years.  Consequently, my wife and I could fund up to $10,000 each.  Total elapsed time to complete: four minutes.  (As a side note, does anyone else notice the age discrimination that is widespread throughout the tax code?  Why should those over 70 ½ be shut out from this process?)


Step Two: Convert the Traditional IRA to a Roth IRA.  I had to fill out a form and submit it to T. Rowe Price.  I just answered a couple basic questions and presto, the Traditional IRA that I had funded on Tuesday is now a Roth IRA.  I will not have any tax consequences, as I already paid taxes on the funds in the account (I am not taking a deduction for this.)  Total elapsed time to complete: ten minutes.


If you have been shut out of the Roth IRA in recent years due to the income limitations, you are back in business.  A married couple can fund $20,000 into a Roth almost immediately.  This is exciting stuff (at least for an accountant).  Any questions or concerns, feel free to submit a question in the bottom right of this webpage or shoot me an email.


This process is very effective if you have no other existing IRA accounts.  If you have other existing IRA accounts, you should discuss this with your tax professional to determine other possible tax implications of the conversion.

This blog is not written or edited by or the Boston Globe.
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Local finance professionals share insights and advice on issues such as budgeting, managing debt, and retirement planning.

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D. Abraham Ringer is a CERTIFIED FINANCIAL PLANNER practitioner and a Financial Adviser with Morgan Stanley Global Wealth Management in Boston. He is registered in MA, NH, NY and several other states to which his articles are directed. For more information please visit
Financial Planning Association™ of Massachusetts has 900 members who specialize in the financial planning process. Many of its members engage in philanthropic pro bono work in their communities, recommend legislation, elevate public awareness, promote financial literacy, and advocate for sound economic and tax policies.
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