topic Re: 2024 Roth IRA Contribution question in Retirement tax questions

2024 Roth IRA Contribution question

TheCryptoProbie — Wed, 11 Feb 2026 10:40:52 GMT

Hello,

I would like to contribute funds to my Roth IRA for 2024.

Based on my MAGI, Age and Status, I can contribute about 5K (Different sites gives different contribution amount for some reason).

However, I am not too clear if my 2024 contribution limits are based on 2023 taxes,

They are based on 2024 taxes which not filed yet? Do I need to approximate my 2024 MAGI or AGI, adding any raises, bonuses, Interest earned from CD/HYSA, stocks gains or loses (which I may not have yet)?

I am just afraid to contribute too much and will need to withdraw and amend tax return, etc,

Thanks for the help,

Gal

Re: 2024 Roth IRA Contribution question

Opus 17 — Mon, 21 Oct 2024 01:37:44 GMT

Yes, your contribution limit is based on your 2024 income. That is one of the reasons that you have until April 15, 2025 to make a contribution designated for 2024 -- so you know exactly what you are allowed to contribute.

Alternatively, if you contribute now and it is too much, you can either withdraw a portion of the contribution tax-free (all withdrawals of Roth IRA contributions are tax-free) or you can recharacterize the contribution as a contribution in a traditional IRA. Then you can do a backdoor Roth IRA conversion, assuming you do not have any funds in a traditional pre-tax IRA. If you do have pre-tax funds in a traditional IRA, your options are a bit more complicated but a recharacterization is still allowed.

Re: 2024 Roth IRA Contribution question

TheCryptoProbie — Mon, 21 Oct 2024 02:17:39 GMT

Thank you for the information.

Since I will use 2024 income, I wont be able to contribute to my Roth IRA unfortunately.

Playing with the Fidelity Contribution Calc, it mentions I would be able to contribute the full amount in a Traditional IRA. Does that sounds right?

Thanks again.

Re: 2024 Roth IRA Contribution question

Opus 17 — Mon, 21 Oct 2024 02:51:17 GMT

@TheCryptoProbie wrote:

Thank you for the information.

Since I will use 2024 income, I wont be able to contribute to my Roth IRA unfortunately.

Playing with the Fidelity Contribution Calc, it mentions I would be able to contribute the full amount in a Traditional IRA. Does that sounds right?

Thanks again.

Yes, however...

You can always contribute to a traditional IRA, you can't always take a tax deduction. It depends on your filing status, income, and whether you or a spouse has a retirement plan at work.

https://www.irs.gov/retirement-plans/ira-deduction-limits

If you can't deduct the contribution, you can still make one. That means you are adding non-deductible (already taxed) money into what is normally a pre-tax IRA. You get a form 8606 as part of your tax return. Keep this as long as you have your IRA, plus 6 years. This is an exception to the rule that you can discard most tax papers after 3 or 6 years.

Now, several things can happen.

1. If you leave the non-deductible money in the IRA, it will grow tax-free. When you retire, as long as you saved your form 8606s, you don't have to pay tax on the money again. For example, suppose you have a balance of $100,000, of which $6000 is non-deductible. Since 6% of the money in the IRA was already taxed, you only pay tax on 94% of the withdrawal. You continue to use form 8606 to track the remaining non-deductible basis in your IRA.

2. If you have no pre-tax money in ANY traditional IRA, you can immediately convert the money to a Roth IRA. This is the "backdoor Roth IRA" strategy, you make a non-deductible contribution, then convert it. Normally you pay tax on conversions but since this is non-deductible and already taxed, the conversion is tax-free. Two steps to get the money into a Roth instead of one step. (And note, this only applies to traditional IRAs, not pre-tax work plans like 401ks. You can have a pre-tax work plan and still do a backdoor Roth IRA as long as you don't have pre-tax (deductible) money in a traditional IRA.

3. If you already have deductible (pre-tax) money in any IRA (they are all combined for this calculation), and you still want to convert to a Roth, you have to use the pro-rata rule. For example, suppose you have a traditional IRA balance of $100,000, of which $6000 is non-deductible. If you were to convert $10,000 to a Roth IRA, you would pay tax on 94% of the conversion and 6% would be tax-free. Your IRA balance would now be $90,000 with $5400 being after-tax. You can gradually convert your IRA to a Roth IRA, and eventually you will get to the point where your IRAs are empty. This is tough because if you are in a high income bracket, you will pay a lot of tax on the conversion, so it does not always make sense to do this.