Don't Miss Out! You Can Still Make Backdoor Roth Contributions this Year

Here's another quick tip from Andrew Rosen, President of Diversified, LLC. There’s still time to make backdoor Roth contributions this year. For more quick tips: Visit our website for more information: ...(read more)

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Quick tip! There’s still time to make backdoor Roth contributions this year. If you haven't made your Roth IRA contributions for this year, don't worry! There is still time to take advantage of a backdoor Roth contribution before the year ends. Let's dive into what this means and how you can benefit from it. Firstly, let's understand what a backdoor Roth contribution is. A Roth IRA is an individual retirement account that allows you to contribute after-tax dollars, meaning that you won't be taxed on the withdrawals in retirement. However, there are income limits that restrict certain individuals from contributing directly to a Roth IRA. This is where the backdoor Roth contribution comes into play. A backdoor Roth contribution involves making a non-deductible contribution to a traditional IRA and then converting it to a Roth IRA. Since there are no income limits for making non-deductible contributions to a traditional IRA, this method allows individuals who exceed the income limits for direct Roth IRA contributions to still benefit from the advantages of a Roth IRA. The deadline for making a backdoor Roth contribution is the same as the regular Roth IRA contribution deadline, which is typically the tax filing deadline of the following year. For example, if you want to make a backdoor Roth contribution for the tax year 2021, the deadline would be April 15, 2022 (or May 17, 2022, for residents of Texas, Oklahoma, and Louisiana due to the winter storm disaster declaration). To make a backdoor Roth contribution, follow these steps: 1. Open a traditional IRA if you don't already have one. You can do this through a brokerage firm or a financial institution. 2. Make a non-deductible contribution to the traditional IRA for the current tax year. The maximum contribution limit for 2021 is $6,000, or $7,000 if you are 50 years old or older. 3. Once the contribution is made, you can convert the traditional IRA to a Roth IRA. Contact your IRA custodian or brokerage firm to initiate this conversion. 4. Pay attention to any tax implications of the conversion. Since the contributions made to the traditional IRA were non-deductible, you won't owe any taxes on the converted amount if there are no gains or earnings associated with it. However, if there are gains, you may be subject to taxes on those. Consult with a tax professional to understand the potential tax consequences. Making a backdoor Roth contribution can be a great option for high-income individuals who are unable to contribute directly to a Roth IRA. It allows you to benefit from the tax advantages of a Roth IRA and have tax-free withdrawals in retirement. Before making any financial decisions, it's always advisable to consult with a financial advisor or tax professional who can guide you based on your specific circumstances and goals. So, if you haven't taken advantage of a backdoor Roth contribution yet, don't miss out on the opportunity. There's still time to make your contributions before the year ends, securing a better future for your retirement. https://inflationprotection.org/dont-miss-out-you-can-still-make-backdoor-roth-contributions-this-year/?feed_id=145398&_unique_id=6529052921ce5 #Inflation #Retirement #GoldIRA #Wealth #Investing #backdoorroth #backdoorrothira #backdoorrothiraexplained #Diversified #diversifiedllc #diversifiedllc #personalfinance #quickfinancialtips #retirementplanning #RothIRA #tip #BackdoorRothIRA #backdoorroth #backdoorrothira #backdoorrothiraexplained #Diversified #diversifiedllc #diversifiedllc #personalfinance #quickfinancialtips #retirementplanning #RothIRA #tip