Backdoor Roth IRA's

Learn the advantages

Key Features

No Income Limits

A Backdoor Roth IRA allows you to get around the income limits of a typical Roth IRA.

No Contribution Limits

A Backdoor Roth has no limits on the amount of conversion from the traditional IRA.

Potential Tax Savings

Save by paying lower taxes now than you expect they will be in the future.

First, Some History

Roth IRAs were initially envisioned as a way for people to save for retirement, but still, be able to access the money without penalties. It was thought that being able to withdraw money without penalties would attract younger savers.

At first, eligibility was limited. Whether you wanted to open a Roth IRA or convert an existing IRA into a Roth, you had to be beneath the income limit. Only people making less than $100,000 a year could convert their plans. In 2022, that limit is $144,000 for singles and $214,000 for couples.

While opening a Roth IRA is still limited to lower-income savers, the conversion cap was removed in 2010. Higher-income investors can obtain the benefit of tax-free withdrawals in retirement. Also, since there are no required minimum distributions (RMDs) for Roth IRAs during the lifetime of the account owner, the entire amount of money saved in a Roth can be passed down to your beneficiaries.

Who Can Qualify

Roth IRAs are a unique and powerful way to save for retirement. You pay taxes up front, before your contributing to a Roth IRA. After that, the growth and withdrawals are tax free. Tax-free income in retirement can offer significant savings to you. The problem is that people who earn over a certain amount aren’t allowed to open Roth IRAs under the typical rules. If your modified adjusted gross income (MAGI) is well into six figures, the IRS starts phasing out the amount that you can contribute. Once your annual income exceeds a certain threshold, you cannot participate at all. If you make too much to open a regular Roth IRA, you might want to consider the alternative: A Backdoor Roth​.

They are an amazing deal, especially for people looking for long-term savings and expecting higher tax rates in the future. With a Roth IRA when you start taking money out, it’s all income-tax-free, including the earnings.

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