June 03, 2021

How to fund a Roth IRA?

How do I get money into a Roth?

There are 2 options to get money into Roth.

1. Roth Contributions

• This is how you do it while still working.
• Limited, base on your income.
• Cap at $6,000 to $7,000 base on your age.

2. Roth Conversion

• While working or retired.
• Moving money from a tax-deferred account to convert to a Roth.

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Episode Transcript

Funding ROTH

Hey, this is Chris Berry and today we’re going to answer the question of how to fund a Roth IRA. If you like this information, please make sure to subscribe to our YouTube channel.

Christopher Berry is a leading estate attorney and advisor in the area of retirement and legacy planning. He has been featured in publications such as Forbes, Kiplingers, Crain’s Detroit, and more. He’s the host of the weekly radio show and podcast The Chris Berry Show. He’s a national thought leader as it relates to retirement and legacy planning and has authored the Amazon best selling book The Caregiver’s Legal Guide.

So I had someone ask me the other day, how do I fund my Roth IRA? How do I get money into a Roth? And really there’s two options on how to get money into Roth, mainly. The first is through what’s called Roth contributions. So this is while you were working, making contributions to a Roth and it is limited based on your income. The amount you can contribute is limited based on your income, where this year if you make over $208,000 as a married couple, you’re going to be limited in your contributions to the Roth. And then also, understand you have to have income coming in to be able to contribute to that Roth and it’s capped. The amount you can put into Roth is capped at 6 or $7,000 based on your age.

And I might be asking, backing up a step, why would you want to get more money into a Roth IRA? Because the money inside of a Roth grows tax free. It’s not estate tax free, where if they do lower the estate tax exemption, now you have a taxable estate, but it is income tax free. So the growth you pull out of that Roth comes out income tax free. So the first way and typically this is how you do it while you’re still working is you do Roth contributions and it might be limited based on your income. Also, you might want to explore whether you can do a Roth contribution at work. Maybe your employer offers a Roth 401k option.

Roth Conversion

The second big way to get money into a Roth is to do Roth conversions. These are something you can actually do while you’re still working or you can do it when you retire. But now you’re moving money from a tax deferred account, like an IRA, pre tax IRA, and then you’re converting it to a Roth. And ideally you have other after tax dollars to pay for that conversion. So if you were to take, say $100,000 out of your IRA and you want to put $100,000 into the Roth, you move $100,000 from the traditional IRA to the Roth. And then ideally you have $20,000 roughly of taxable assets or post tax assets that you can use to pay the tax on that conversion. That would maximize the amount that you have inside of that Roth IRA, which is that tax free bucket that so many people are going after these days.

So how do you convert or how do you get money into a Roth? Really there’s one of two ways. One is just a Roth contribution where you’re typically taking after tax dollars, moving it into a Roth. You’re limited to move 6 to $7,000. The other option is you can do a Roth conversion taking money from that pre tax account, paying the tax, and then putting the money inside of that Roth, which grows tax free. So this has been Chris Berry talking about Roth conversions. Hopefully you found this helpful, thank you.

Castle Wealth Group has clients across the nation and helps them [inaudible 00:03:25] plan, protect, and preserve what is important by creating a retirement and legacy blueprint.