What Baby Boomers Need to Know About Roth IRAs

As the table above shows, for those who file their taxes as single or head of household in 2024, you can make a full Roth IRA contribution if your MAGI is under $146,000, but you cannot contribute if your income exceeds $161,000.

For 2024, married couples who file a joint tax return can make a full Roth IRA contribution if their MAGI is under $230,000 and cannot contribute if it exceeds $240,000.

2. Converting a Traditional IRA Into a Roth IRA

If you have a traditional IRA, you can roll all or part of it into a Roth through a Roth IRA conversion. Aside from any inheritance considerations, whether a conversion makes sense for you is basically a matter of whether you would prefer to take a tax hit now and avoid taxes in the future (by converting to a Roth IRA) or continue to postpone the tax hit and deal with it later (by staying with your traditional IRA). Of course, it doesn’t have to be an all-or-nothing choice; you can convert a portion of your traditional IRA and leave the rest where it is.

You’ll owe income tax on the money that you take out of your traditional IRA to put into your Roth, just as if you were withdrawing it to spend. If you’re planning to convert a sizable amount, you’ll want to look closely at your current highest marginal tax bracket and possibly spread the withdrawal over several years. Below are examples of a Roth IRA conversion using the 2024 and 2025 marginal tax brackets.

2024 Tax Bracket

In 2024, a single taxpayer falls in the 24% tax bracket for income of $100,525 to $191,950 and in the 32% bracket for income that exceeds $191,950 to $243,725.

As a result, a single taxpayer who earns $110,000 per year could convert up to $81,950 and remain in the 24% tax bracket. Anything more than that would be taxed at a rate of 32% or higher.

2025 Tax Bracket

In 2025, a single taxpayer falls in the 24% tax bracket for income of $103,350 to $197,300 and in the 32% bracket for income that exceeds $197,350 to $250,525.

As a result, a single taxpayer who earns $110,000 per year could convert up to $87,300 and remain in the 24% tax bracket. Anything more than that would be taxed at a rate of 32% or higher.

Timing a Roth Conversion

Timing is important when converting a Roth IRA. Suppose, for example, that our single taxpayer is about to retire from their $100,000 job and expects to have a retirement income from all sources of $50,000, which falls in the 22% marginal tax rate (pre-IRA conversion), using 2024 tax rates.

They could convert as much as $50,525 and remain in the 22% tax bracket. Convert anymore, and that portion would be in the 24% bracket or higher since income would exceed $100,525.

Similarly, if your income is lower in any particular year for another reason, such as a job loss, that could be a good opportunity to do a conversion if you wish to do so. Also, you might have a few years of reduced income if you retire at, say, age 66, but delay taking Social Security benefits until they max out at age 70.

Remember that if you were born between 1951 and 1959 or in 1960 and after, you’ll have to begin taking required minimum distributions (RMDs) from any non-Roth retirement accounts at age 73 or 75, respectively, which could put you back into a higher marginal tax bracket.

Converted Roth Withdrawal Penalties

Note that there can be a 10% penalty if you withdraw the converted funds within the first five years of opening a Roth account. However, there’s an exception for anyone over age 59½—as virtually every baby boomer already is or soon will be. 

Also, you will have to wait five years before withdrawing any of the new Roth account’s earnings unless you already had another Roth IRA for at least five years before you made the conversion. That could be a deal breaker for some older baby boomers or anyone who expects to need the money before those five years.

3. Rolling Over a 401(k) Into a Roth IRA

If you’re leaving your job, or if you left behind an old 401(k), 403(b), or 457(b) plan account at a previous employer, you can roll that money over into an IRA, either Roth or traditional. If you go the Roth route, you’ll owe taxes on the money just as you would if you converted from a traditional IRA to a Roth. You can also roll a portion of the money into a Roth and the rest into a traditional IRA for the time being, which may ease your tax burden if a lot of money is involved.

If your 401(k) or similar plan is a designated Roth account, you can roll it over into a Roth IRA with no tax consequences. However, you may have to pay tax on your employer’s matching contributions, which are held in a separate account. One advantage of a Roth IRA over a designated Roth 401(k) is that it is not subject to RMDs during the original owner’s lifetime, unlike the 401(k).

The Bottom Line

Baby boomers, like other generations, can benefit from having a Roth IRA in retirement, but there are tradeoffs. There’s no up-front tax break for contributions to a Roth account, and converting a traditional IRA into a Roth can mean a big tax bill. The major question is whether you would rather pay taxes now in return for tax-free income after you retire.

Another consideration for some people is whether they hope to leave the money to their heirs. Because Roth IRAs aren’t subject to RMDs, they can be better than traditional IRAs for that purpose.