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Why does ROTH contribution have an annual income limit?

#1
I was giving a ROTH/T-IRA primer to a close relative (much younger than me) who was looking for tax-advantaged retirement plans. He was unfamiliar with the IRA. A few years ago, I had him explore his 401K options. He was initially unsure but once he realized that he was leaving money on the table (the employer contribution), he started with enough contribution to get full match. Over the years, his income increased, his wife took up a small job, and he maxed the 401K contribution. With the increased income, he had increased tax bill too. So he was looking for other suggestions.
 
Based on his income details, he is unable to get tax deduction for any T-IRA contribution. Their income is below the ROTH annual income limit. So I explained the benefits and constraints of ROTH IRA. He is considering opening ROTH for both and making 2018 contributions - he thinks this would be a good choice for their retirement savings given their personal income/savings situation.
 
Towards the end, he mentioned that his wife is hoping to get a better job next year and they would exceed the annual income limit for any ROTH contribution. This was a natural question. So I explained to him that he can still do it next year - make non-deductible contribution to T-IRA anytime even if their income is too high; subsequently use the Backdoor ROTH conversion to immediately move that to ROTH. He initially thought it was a tax-dodge, especially due to the term "backdoor". I had to pull out the New Tax Bill and highlight footnote 269 on page 289 that says " 269 - Although an individual with AGI exceeding certain limits is not permitted to make a contribution directly to a Roth IRA, the individual can make a contribution to a traditional IRA and convert the traditional IRA to a Roth IRA."

 
His doubt was clarified, but he asked a legitimate follow-up question - why then there is an annual income limit for ROTH contributions? If it is perfectly legitimate to contribute to ROTH IRA without being constrained by income limit, and without violating IRS Step Transaction doctrine, this would imply that ROTH contribution does not have an effective annual income limit. The question is a valid one and I count not find a satisfactory answer.

 
Does anyone know?

The only reason I could think of where this complication matters is for someone past 70.5 and earning above the ROTH contribution limit. AFAIK, they cannot contribute to T-IRA anymore and hence the backdoor route is not available to them. Having said that, ROTH is more powerful when used early on (the tax-free growth makes a huge difference over a longer time-horizon). For someone whose career is picking up and as a result, the annual income exceed the ROTH contribution limit at some point in the career, the annual limit seems like a purposeful effort to confuse and discourage such earners to take advantage of ROTH. It'd have been much simpler for a common person to be able to continue contributing to ROTH throughout the career, in the same manner that the person is able to contribute to an employee-sponsored 401K, without having to get confused/misled by tax laws.
 
Probably there is a history or valid reason here for creating a complicated scheme? I do not have much experience with ROTH/T-IRA myself, but I know several forum members are very knowledgeable in this area. I'm hoping to see some insight from them on this topic. Thank you in advance!
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#2
Originally, you could not do a Roth conversion if your income exceeded $100K.   The idea was like that of limiting contributions in general, so that high earners wouldn't reap the vast majority of the benefits.
 
In order to pass the 2005 tax bill, Congress had to come up with a revenue enhancer so that the revenue shortfall over the next ten years would not be impermissibly large.    One way to increase revenue was to pull it in from future years.   By letting higher earners convert now, you would get more conversions (higher immediate revenues) at the cost of lower revenues decades later (when they would have withdrawn the money from their traditional IRAs).
 
No reason to remove the contribution limits - that's a revenue destroyer.


https://www.taxpolicycenter.org/publicat...nd-mirrors

https://www.cbpp.org/research/roth-ira-p...-roth-iras
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