Am I Too Old to Start a Roth IRA?

Written by Dennis Blitz on Jan 12, 2021

Perfect Weapon

Roth IRAs are the perfect weapon against income tax. As long as you have earned income, you can contribute to a Roth IRA.  The earnings made inside a Roth IRA can be 100% income tax-free after:

  • Attaining the age 59½
  • Owning a Roth account for at least five years
    • If your Roth was transferred from a previous IRA administrator, the five year Roth clock stared at the time the Roth account was established at a previous administrator.


What if you want to take a distribution before age 59½? Distributions can be made from a Roth IRA at any age and are income-tax-free to you up to the amount of your contributions and conversions. If you are under the age of 59½, the IRS will charge you a 10% penalty for an early distribution.

  • The income tax-free treatment of distributions from a Roth IRA automatically transfers to your beneficiaries should you die.
  • There is no limit on how large your Roth IRA may grow

What About Social Security?

If you are getting close to or have already started drawing Social Security payments, converting to a Roth IRA is an excellent money saver. Distributions from a Traditional IRA are considered income and affect your Social Security payments’ taxation. However, distributions from a Roth IRA do not count as income.    

Tax Lock

By doing a Roth conversion now, you are locking in today’s tax rate on today’s value of the assets. No matter how high taxes go in the future and how valuable your Roth IRA assets become, you already paid the taxes.

It’s Not Too Late

The Roth IRA is a wonderful gift that is accessible to everyone. When I hear someone say, “That’s all very nice but, I’m too old to start a Roth account.” This comment always makes me shake my head. The tax code lists no maximum allowable age limit for starting or converting to a Roth IRA. There are some exciting upsides to starting later in life.

  1. You likely have already completed one of the two requirements for the 100% income tax treatment: You are already over age 59½.
  2. When you convert from a Traditional to a Roth IRA, the need to take annual Required Minimum Distributions (RMDs) stops.
  3. You are likely at your top earning years and may have the funds available to make contributions. Plus, this is the time you want to make the most of your money.  

How Do I Convert a Traditional IRA to a Roth IRA?

At the IRA Club, we make the process easy! Some people mistakenly believe they may convert only their Traditional account’s cash balance. However, you may convert cash and assets in your Traditional account to a Roth account.

Converting Cash

Converting cash from Traditional to Roth is simple. This is because cash converts at a 1 to 1 ratio.

EXAMPLE: You have $25,000 in your IRA all in cash. We simply pick up the $25,000 and put it into a Roth IRA which we open for you.

From that point forward, all the earnings from the $25,000 will receive Roth tax treatment. Next January, IRA Club will issue a 1099R in the amount of $25,000 which will be treated the same as ordinary income on your income tax. However, now your account is a Roth, and even if that $25,000 grows to $1,000,000. There will be no further income tax due once you have:   

  • Attained the age 59½ and
  • Owned the Roth account for five years

Converting Assets

The process is the same as converting cash. However, you will need to identify the value of the asset being converted.

EXAMPLE: Your IRA invested in an asset. We will use a house for our example however, the process is similar for any asset. Two years ago, your Traditional IRA bought an investment house for $120,000. The tenants are paying their rent on time and the property has been easy to maintain. Suddenly, Tesla announced they are building a mega factory just two miles away. The factory will employ thousands of workers who will need housing. Your IRA’s house could sell for $185,000.

But not so fast you think, you decide if Tesla comes, other businesses will follow, they too will need employees. In two more years, the house could have a market value of $250,000. With the value increasing so rapidly you decide to convert to a Roth. At what value will the conversion take place? At the original $120,000, at today’s value of $185,000, or at the projected $250,000?The answer is today’s value: $185,000. You simply hire a licensed Real Estate appraiser and allow them to establish a market value. 

Frequently Asked Questions

  • Must you convert your entire account at one time?
    • No. you may convert all or any part of your Traditional IRA to a Roth IRA.
  • Is there a best time to perform a Roth conversion?
    • Any time is good however, there are two times that can make a conversion especially attractive.
      • Your IRA has recently bought or is about to buy, an asset you believe has a high potential for growth. Making the Roth Conversion now could save you from high-income tax costs in the future.
      • Your current income is low. Perhaps your income is lower this year for any reason. Use this time to pay the tax on the conversion at a reduced income tax rate caused by your lower income tax rate.

Roth After Age 70.5

Good news! You can contribute to a Roth IRA after age 70.5. as long as you have earned income. The bottom line is you are never too old to do a Roth conversion or start a Roth account.  Do not delay and start your Roth account today! Call now 312-795-0988


IRA Club offers no investments, products, or planning services. Therefore, please consult your attorney, tax professional, financial planner, and any other qualified person before making any investments.