The concept of income limits for Roth IRA contributions is not new, they have been in place since Roth IRAs were introduced in 1997. Each year, the IRS adjusts the income phase-out ranges slightly to account for inflation. If you’re a high-income earner thinking about adding to your Roth IRA in 2025, IRS income limits will determine whether you can contribute directly or if you’ll need to explore alternative strategies.
What Are the 2025 Roth IRA Income Limits for High Earners?
High-income individuals and couples will see new Roth IRA income limits in 2025. Here’s what you need to know:
Phase-out begins at these modified adjusted gross income (MAGI) thresholds:
- Single filers: Contributions start phasing out at $161,000.
- Married couples filing jointly: Contributions start phasing out at $240,000.
Reduced contributions are allowed within these ranges:
- Single filers: Can contribute a reduced amount if their MAGI is between $161,000 and $176,000.
- Married couples filing jointly: Can contribute a reduced amount if their MAGI is between $240,000 and $250,000.
Direct Roth IRA contributions are not allowed if:
- Single filers: Earn more than $176,000.
- Married couples filing jointly: Earn more than $250,000.
The good news? High earners still have several tax-efficient strategies to benefit from Roth accounts’ tax-free growth and withdrawals. Let’s explore the best ways to work around Roth IRA income limits and keep your retirement savings on track.
Can You Use a 529 Plan Rollover to Fund a Roth IRA?
A lesser-known provision in the SECURE 2.0 Act allows individuals to roll over unused 529 plan funds into a Roth IRA, provided they meet specific conditions. To take full advantage of this strategy, the 529 plan must be opened with you as the beneficiary. If you’ve been funding a 529 plan for education but no longer need all the funds for school expenses, and you have the account set up for yourself, this strategy could be a tax-efficient way to repurpose your savings.
Key Rules & Benefits:
- 15-Year Waiting Period: The 529 account must have been open for at least 15 years before a rollover can occur.
- Lifetime Rollover Cap: There’s a $35,000 lifetime cap per beneficiary for rollovers from a 529 plan to a Roth IRA.
- Annual Contribution Limits Apply: Rollovers are subject to the Roth IRA contribution limit ($7,000 for those under 50 and $8,000 for those 50+ in 2025).
- Earned Income Requirement: As the beneficiary, you must have earned income equal to or greater than the rollover amount in the transfer year.
This 529-to-Roth strategy allows leftover education funds to continue growing tax-free while also supporting your retirement savings goals.
Is a Roth 401(k) a Better Option for High Earners?
If your employer offers a Roth 401(k), this is one of the best alternatives to a Roth IRA because it has no income limits and higher contribution allowances.
Key Benefits of a Roth 401(k):
- No Income Limits: Anyone can contribute to a Roth 401(k), regardless of income.
- Higher Contribution Limits: In 2025, you can contribute up to $23,500 (or $31,000 if you’re 50 or older).
- Employer Match Still Applies: While employer contributions must go into a pre-tax 401(k), your personal contributions will grow tax-free.
A Roth 401(k) is an excellent alternative to a Roth IRA for high-income earners looking for tax-free withdrawals in retirement while still benefiting from an employer match.
How Does a Backdoor Roth IRA Work for High-Income Earners?
The Backdoor Roth IRA strategy is a legal and IRS-approved way for high earners to bypass Roth IRA income limits and enjoy tax-free retirement growth.
Steps to Execute a Backdoor Roth IRA:
- Contribute to a Traditional IRA: Make a non-deductible contribution (since high earners don’t qualify for tax-deductible IRA contributions).
- Convert to a Roth IRA: Shortly after funding the Traditional IRA, convert the amount to a Roth IRA. Since the contribution was already taxed, the conversion should have minimal tax consequences.
- Watch Out for the Pro-Rata Rule: If you have pre-tax IRA funds, the IRS will prorate your conversion, meaning a portion will be taxed. One way to avoid this is by rolling pre-tax IRA funds into a 401(k) before doing a Backdoor Roth conversion.
The Backdoor Roth IRA strategy remains a powerful tool for high-income earners who want to take advantage of Roth benefits while legally working around income restrictions.
Can an HSA Be Used as a Roth-Like Retirement Account?
While not a Roth IRA, a Health Savings Account (HSA) offers many of the same tax advantages, making it one of the best retirement savings tools available.
Why an HSA is Powerful for Retirement:
- Triple Tax Advantage: Contributions are tax-deductible, growth is tax-free, and withdrawals for qualified medical expenses are tax-free.
- Retirement Flexibility: After age 65, you can withdraw HSA funds for any reason (non-medical withdrawals are taxed like a Traditional IRA, but there’s no penalty).
- 2025 HSA Contribution Limits: Individuals can contribute up to $4,300, while families can contribute up to $8,550.
Since healthcare is one of the biggest expenses in retirement, maxing out an HSA can act as a Roth-like investment vehicle for future medical costs and tax-free withdrawals.
How Can High Earners Still Benefit from Roth Accounts?
Even though Roth IRA income limits prevent direct contributions, high earners still have several options to maximize tax-free retirement savings. By leveraging these alternative strategies, you can continue benefiting from Roth accounts and grow your wealth efficiently.
Best Roth Workarounds for High-Income Earners:
✔ 529 Plan Rollovers: Convert unused education funds into a Roth IRA (subject to limits).
✔ Roth 401(k) Contributions: No income limits and higher contribution limits.
✔ Backdoor Roth IRA: Legally convert non-deductible IRA contributions into a Roth IRA.
✔ HSA Savings: Enjoy tax-free growth and withdrawals for medical expenses.
Through strategic planning, high earners can build a tax-efficient retirement plan while ensuring their wealth grows in the most advantageous way possible.
If you have any questions or would like to explore which strategy might work best for your financial situation, our team of CERTIFIED FINANCIAL PLANNERTM (CFP®) professionals would be happy to assist. We can show you how our financial planning process can help you stay on track and achieve your financial goals. Please contact us for a complimentary discovery call at 631.218.0077. You can also send us a message directly.
R.W. Rogé & Company, Inc. is an independent, fee-only financial planning and investment management firm serving clients locally and virtually across the country, with Long Island, New York, and Beverly, Massachusetts office locations. R.W. Rogé & Company, Inc. was founded on a “client first” culture and proudly commits to acting in your best interest as a fiduciary. We have helped clients Plan, Achieve, and Live® the life they want since 1986. To learn more about how we do this, explore our detailed overview of services and approach.
