💥 Don’t rule out a Roth IRA!⁠
⁠
🔐 Did you know that if you exceed $144K annually the government prevents you from putting your money in a Roth IRA.⁠
⁠
🤯 But you can use this strategy: a Roth IRA through the back door.⁠
⁠
💭 Just set up two accounts: traditional IRA and Roth IRA. ⁠
⁠
🔁 What you do is put your money in your traditional IRA, for example, $6,000 and then roll it into your Roth IRA. This process is called conversion⁠
⁠
🤑 THE BEST: The tax-free growth that a Roth IRA gives you. ⁠
⁠
#shorts…(read more)

LEARN MORE ABOUT: IRA Accounts

CONVERT IRA TO GOLD: Gold IRA Account

CONVERT IRA TO SILVER: Silver IRA Account

REVEALED: Best Gold Backed IRA

Having a million dollars in a Roth IRA sounds like a pipe dream, but it’s not impossible. One way to achieve this is through backdoor Roth contributions. But what exactly is a backdoor Roth contribution and how do you make one?

First, let’s understand what a Roth IRA is. It’s a retirement account in which you contribute after-tax dollars, meaning you don’t get a tax deduction for your contribution. However, your money grows tax-free, and you can withdraw your contributions and earnings tax-free after age 59 1/2. There are also no required minimum distributions (RMDs) for Roth IRAs, meaning you can hold onto your money for as long as you want.

Now, let’s talk about backdoor Roth contributions. These are a way for high-income earners to contribute to a Roth IRA, even if they exceed the income limits. In 2021, the income limit for contributing to a Roth IRA is $140,000 for single filers and $208,000 for married couples filing jointly. If your income exceeds these limits, you may not be able to contribute to a Roth IRA directly.

But there is a workaround. You can make what’s called a non-deductible contribution to a traditional IRA and then convert it to a Roth IRA. Since the contribution was made with after-tax dollars, there is no tax liability when you convert it to a Roth IRA. This is why it’s called a backdoor Roth contribution.

Now that we understand what a backdoor Roth contribution is let’s dive into the steps to making one:

1. Make a non-deductible contribution to a traditional IRA: If you haven’t already, open a new traditional IRA account and contribute funds up to the annual limit ($6,000 in 2021, or $7,000 if over age 50). Be sure to let your financial institution know that this is a non-deductible contribution.

2. Wait: If you have existing pre-tax funds in any traditional, SIMPLE, or SEP IRA accounts, you’ll need to wait to convert your contribution to a Roth IRA for at least a day. This is to ensure that your conversion is not subject to the pro-rata rule, which could result in a portion of your conversion being subject to taxes.

3. Convert to a Roth IRA: Once you’ve waited, you can convert your traditional IRA contribution to a Roth IRA. This can be done through your financial institution’s online portal or by contacting them directly. There is no limit to how much you can convert, but keep in mind that you’ll owe taxes on any pre-tax funds that you convert.

4. Report on your tax return: You’ll need to report your non-deductible contribution and your conversion on your tax return using IRS Form 8606. This ensures that you’re not taxed on the non-deductible contribution and that any future withdrawals from your Roth IRA are tax-free.

In conclusion, making a backdoor Roth contribution can be a great way to contribute to a Roth IRA even if you exceed the income limits. Just be sure to follow the steps carefully and consult with a financial advisor if you have any questions. Who knows, with consistent contributions, you may eventually reach that million-dollar milestone in your Roth IRA.