I've been getting questions about retirement account contributions for the 2022 tax year.
One of the main accounts that I'm getting asked about is a Roth IRA. Roth IRA's are one of the best retirement accounts because distributions are tax free.
The only catch to having a Roth is that there are income limits. For 2022, if you make over $144,000 you're no longer eligible to contribute into your Roth IRA. You can still own a Roth, but you can no longer contribute to it.
Here's the good news. There's a back door approach called the Back Door Roth IRA which allows someone making more than the threshold to contribute into their Roth.
To keep it simple, instead of contributing directly into your Roth, you're going to make a nondeductible contribution into your Traditional IRA. Then, you'll let the funds sit for 30 days and then call up your brokerage and ask them to transfer those funds into your Roth. It's as simple as that . Once the money is in your Roth, you can invest into whatever stock or index fund you like and let that money sit and grow. The best part is, it's all tax free when you start pulling it out at retirement.
Hope this helps. Let me know if you have questions.