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Back Door Roth IRA



If you're making an IRA contribution for 2022, this one's for you...........


Here's a refresher: There are two types of IRA accounts: Traditional and Roth. Traditional IRA's are tax deductible but Roth IRA's are not. But distributions (down the road) are taxable from a Traditional but not taxable from a Roth. Roth's carry a huge advantage since earnings grow tax free and there's no tax when you take it out.


If the tax savings are worthwhile to you now, do the traditional. But if you can afford to pay the tax now, you know for sure there's no tax later on when you take it out from a Roth.


There's a catch: you can't contribute to a Roth for 2022 if you income is over the following limits:


Single $144k

Married $214k


Or can you?


Thus the "Back Door" IRA. There's an ongoing loophole for anyone over these income limits. Instead of contributing directly to the Roth, you instead make a non deductible contribution to your traditional IRA. And then CONVERT that contribution to a Roth (through the "back door").


Yes, it's legal. Yes it's well known. And yes, it's still permitted.


Before making your IRA contribution for 2022, let's make sure to cover this, if applicable to you.


If you have questions, please let me know.


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