Despite the recent volatility, we still need to save for retirement! Roth accounts can be a great source of tax-free income in retirement when used correctly. Some high-income earners cannot fund Roth IRAs directly, but the Backdoor Roth IRA strategy allows many people to still get money into this account.

Roth IRA. What is it? A Roth Individual retirement account (IRA) is an account you fund with money that has already been taxed, and then qualified withdrawals are not taxable. In 2019 and 2020, you can contribute up to $6,000/person as long as you are below the income limits. Depending on your tax filing status, if you make anywhere from $0-203,000, you may not be able to contribute directly into this account.

The back door Roth. There are no income restrictions on converting money into a Roth IRA. The back-door strategy involves opening a Traditional IRA, making your contribution into that account, and then converting the money into a Roth IRA. It’s more complicated than that, so listen to the episode!
Tax filing. You must pay attention to your tax filing status and report contributions and conversions correctly. If you don’t, you may end up overcontributing or paying taxes that you do not owe.

Tip of the Day: You can make prior year IRA contributions up until the tax filing deadline for the year. You have until 4/15/2020 to make 2019 contributions!

Thanks again to the Financial Clarity Blog, our amazing clients, and the whole team at The Finity Group.

For more financial planning tips from Corey and Rachelle find them on LinkedIn: @CoreyJanoff and @RachelleVanderzanden; Instagram: @CoreyJanoff and @VanderzandenRachelle; and Twitter: @CoreyJanoffCFP and @RachelleFinance

Discussions in this show should not be construed as specific recommendations, legal, or investment advice. Always consult with your investment professional before making important investment decisions. Advisory services through Cambridge Investment Research Advisors, Inc., a Registered Investment Advisor. Securities offered through Cambridge Investment Research, Inc., a registered Broker/Dealer, Member FINRA/SIPC. Finity Group and Cambridge are not affiliated….(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

As a medical professional, it is essential to have financial clarity and to understand all the possible investment options available. One of the newest and most popular investment vehicles is the Backdoor Roth IRA.

The Backdoor Roth IRA is a tax-advantaged investment account that allows high-income earners, such as doctors, to contribute to an IRA even if they exceed the annual income limits. This strategy involves making a non-deductible contribution to a Traditional IRA and then converting it to a Roth IRA, which allows for tax-free withdrawals in retirement.

Here is a simple clip that explains how the Backdoor Roth IRA works:

First, you need to open a Traditional IRA account and make a non-deductible contribution. The maximum contribution limit for individuals under 50 years old is $6,000, and for those older than 50, it is $7,000.

Next, you can convert the Traditional IRA account to a Roth IRA. When you convert, the amount you convert will be subject to income taxes. It is essential to understand that you will owe taxes based on the full amount of the conversion, even if you initially only made a non-deductible contribution.

Finally, you can enjoy the benefits of tax-free withdrawals during your retirement years, once your account has been open for at least five years.

The Backdoor Roth IRA is an excellent investment strategy for doctors who earn high incomes and want to maximize their retirement savings while minimizing their tax liability. However, it is crucial to consult with a financial advisor or tax professional to ensure that this strategy aligns with your financial goals and retirement plan.

In conclusion, the Backdoor Roth IRA is an investment strategy that offers doctors financial clarity and the opportunity to save for their retirement years tax-free. By understanding how it works, medical professionals can make informed decisions and take full advantage of this unique investment opportunity.