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Secrets of the Backdoor Roth IRA


What's the Backdoor Roth IRA Secret? It's the reason you can save even more money for retirement with a Roth IRA set up with after tax contributions. Learn more! -- Set up your account today! -- Learn more about the Solo 401(k) plan and how it can help you: Learn more about the Self-Directed IRA and how it works: -- Discover more videos by IRA Financial: Subscribe to our channel: -- About IRA Financial: IRA Financial Group was founded by Adam Bergman, a former tax and ERISA attorney who worked at some of the largest law firms. During his years of practice, he noticed that many of his clients were not even aware that they can use an IRA or 401(K) plan to make alternative asset investments, such as real estate. He created IRA Financial to help educate retirement account holders about the benefits of self-directed retirement plan solutions. Learn More: ...(read more)



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The Backdoor Roth IRA Secret For many people, saving for retirement is a top priority. And for those looking to maximize their tax-free growth potential, a Roth IRA can be an attractive option. But what if your income is too high to contribute directly to a Roth IRA? Enter the Backdoor Roth IRA Secret. First, a quick primer on Roth IRAs. Unlike traditional IRAs, which offer a tax deduction for contributions but are taxable upon withdrawal in retirement, Roth IRAs are funded with after-tax dollars but grow tax-free, allowing for potentially greater gains over time. In addition, Roth IRAs do not have required minimum distributions (RMDs) like traditional IRAs, meaning you can leave the money in the account to continue growing tax-free throughout your entire lifetime. However, there is an income limit for contributions to a Roth IRA. For tax year 2021, the maximum contribution is $6,000 for individuals under age 50 with modified adjusted gross incomes (MAGI) below $125,000, while those with MAGIs above $140,000 are not eligible to contribute at all. For married couples filing jointly, the limit is $12,000 for those with MAGIs below $198,000, and contributions are phased out for those with MAGIs between $198,000 and $208,000. So, what’s the Backdoor Roth IRA Secret? Essentially, it involves contributing to a traditional IRA and then converting those funds to a Roth IRA. There are no income limits for contributing to a traditional IRA, but if you have a workplace retirement plan, your contributions may not be fully tax-deductible, depending on your income level. That’s okay for the backdoor Roth IRA strategy, because the contributions will be made with after-tax dollars. Once you have made your traditional IRA contributions, you can then convert those funds to a Roth IRA. The key here is to make sure you do not have any other traditional, SEP, or SIMPLE IRAs, because the tax code considers all of these accounts together (known as the aggregation rule), and would pro-rate any conversion you make to a Roth IRA based on the total balance of all your accounts. In other words, if you have a traditional IRA with a balance of $100,000 and you contribute $6,000 to another traditional IRA, you cannot convert just the $6,000 to a Roth IRA and avoid taxes on that amount. Instead, you would have to pro-rate the conversion based on the total balance of both accounts, resulting in a significant tax bill. To work around this, you can roll over any other traditional, SEP, or SIMPLE IRAs into your workplace 401(k) plan, if allowed, or into a solo 401(k) if you are self-employed. Once your traditional IRA balance is zero, you can make your Backdoor Roth IRA contribution and conversion without any tax consequences. There are some potential pitfalls to the Backdoor Roth IRA Secret, such as the pro-rata rule if you have other IRA accounts, and the possibility of inadvertently triggering the excess contribution penalty if you contribute more than the annual limit. It’s important to consult with a financial advisor or tax professional to ensure you are doing everything correctly. But if done correctly, the Backdoor Roth IRA Secret can be a powerful tool for high earners looking to take advantage of the tax-free growth potential of a Roth IRA. It’s a backdoor that the IRS has left open for us to use, so why not take advantage of it? https://inflationprotection.org/secrets-of-the-backdoor-roth-ira/?feed_id=83028&_unique_id=642647e450419 #Inflation #Retirement #GoldIRA #Wealth #Investing #401k #backdoorroth #iracontribution #IRAFinancial #IRS #Retirement #retirementplan #sdira #SDRothIRA #selfdirectedira #SelfDirectedNation #SelfDirectedRothIRA #Solo401k #BackdoorRothIRA #401k #backdoorroth #iracontribution #IRAFinancial #IRS #Retirement #retirementplan #sdira #SDRothIRA #selfdirectedira #SelfDirectedNation #SelfDirectedRothIRA #Solo401k

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