Understanding Roth IRAs: Contributions vs. Conversions

Written By Maxwell Wittenberg

By Max Wittenberg, Financial Advisor

One of the most common questions I get as a financial advisor is:
“Should I be using a Roth IRA?”

Roth IRAs aren’t magic—but they’re about as close as it gets to tax-free growth. The key is understanding the two ways to fund one: contributions and conversions.

Contributions

Roth contributions are made with after-tax dollars and grow tax-free. You can withdraw your original contributions (your basis) at any time, tax and penalty-free. Additionally, up to $10,000 in earnings can be used for a first-time home purchase.

Key limits:

  • Income restrictions apply (2025: $161,000 single / $240,000 married filing jointly)

  • Annual contribution limit: $7,000 ($8,000 if over age 50)

Conversions

Conversions involve moving funds from a traditional IRA, 401(k), or 403(b) into a Roth IRA. There are no income limits and no annual caps on how much you can convert, making this a powerful strategy for high earners. You will owe ordinary income tax on the converted amount, and converted funds must remain in the account for five years to avoid early withdrawal penalties if under age 59½.

We help clients build Roth conversion schedules—strategically converting pre-tax dollars up to the top of their current tax bracket. This approach minimizes tax impact while maximizing future tax-free income.

Why It Matters

Roth IRAs also provide a strong legacy benefit: assets passed to beneficiaries remain tax-free, making them one of the most effective tools for generational wealth transfer.

Let’s Talk

If you’re unsure how Roth strategies fit into your plan, let’s connect. With the right approach, you can reduce long-term taxes, gain more control in retirement, and leave a lasting legacy.

Maxwell Wittenberg
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