Hi and welcome to Just Answer!
Your thinking is perfectly correct.
While the income limit on Roth IRA contributions is still in effect, because
(1) There is no income limit on contributions to Traditional IRA, and
(2) The income limit on conversions was repealed starting 2010 -
That effectively allows to overcome the Roth IRA contribution income limit as you suggested.
Same arguments may be found in many articles - for instance - http://www.your-roth-ira.com/2011-roth-ira-contribution-limits.html
Most likely we may expect that the income limit on Roth IRA contributions will be repealed as well.
Thank you Lev for the clear and quick response. Now that we agree on this way to contribute to a Roth IRA, do you see any time restriction (or recommend any) for making my Traditional IRA contribution, and then later rolling it into a Roth?
I gave one year as a guideline, so filing the 8606 form would be simple each time, but I did not see any such restriction.
One last detail. This year, 2011, my employer did start offering a plan to save $1500 in a 401K qualified plan. (They have major income disparities in the firm, so I can't use the 16500 maximum.) This is fairly useless for a high income earner. Can I still opt for using the IRA path shown above in 2011?
IRS publication 590 - www.irs.gov/pub/irs-pdf/p590.pdf page 63
Most of the rules for rollovers, described in chapter 1 under Rollover From One IRA Into Another, apply to these rollovers. However, the 1-year waiting period does not apply.
So – there is no time limitation.
To be on the save side – I might suggest to make such rollover after due date of the return. Thus if you do IRA contribution for 2010, the recommended timing for the rollover – assuming the 2010 tax return is timely filed - after Apr 18, 2011. However – I do not see any restrictions to rollover at any time.
If you are eligible for retirement plan at work - the fact of opting out will not affect your Roth IRA eligibility. I suggest to use 401k.