BACKDOOR ROTH IRA | You no longer qualify for a Roth? You can still get huge tax savings by doing a Backdoor Roth. There’s a tax loophole that makes this possible. This video explains 3 easy steps on how to do a legal roth hack, which involves a Traditional IRA conversion. We also share common pitfalls to avoid!
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Skip ahead here!
0:00 – Backdoor ROTH IRA
0:30 – Step 1 – Contribute to a traditional IRA
1:12 – Step 2 – Move all pre-tax IRA’s to your current 401K
3:07 – Convert your traditional IRA to a ROTH IRA
***RECOMMENDED READING LIST***
The One-Page Financial Plan by Carl Richards (easy read, holistic + fun graphics!)
Simple, Smart Investing by Ian Kennedy (can help you construct your investment portfolio)
A Random Walk Down Wall Street by Burton G. Malkiel (classic book that sold me on index funds)
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Alvin Carlos is a CFP® professional and CFA® charterholder. His team helps young/mid-career professionals to be smarter with their money. They help them optimize their investments, lower taxes, pay off debt, and have peace of mind.
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This content is for education and entertainment purposes only. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. All investing involves risk, including the possible loss of principal.
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Congrats on 3,000 subs!
Can I do this strategy if I just have my initial investment rollover IRA and not any other contributions to the IRA to then convert the IRA into a Roth IRA?
For example initial rollover $10K (rollover 401 to traditional IRA), no contributions in 20 years and traditional IRA balance today $50k) to avoid the taxes of converting from traditional to Roth?
that’s interesting .. many recommends moving traditional ira to Roth quickly to avoid accumulating gains and then complicating or triggering pro rata
If i already put 6k in roth for fidelity. Can i do this? Is this better?
Is all of this movement only because you are converting a Traditional IRA BACK to a 401k? This was so confusing to me and I have never heard all of this before as typically people are moving from 401k to Traditional IRA and not the other way around and from my understanding all of this transferring is not required when you are going from 401k to Trad IRA to Roth IRA.
When you contribute to your Roth ira and you said you can select to not withhold tax my question is do you owe the IRs money for doing that? When are you gonna pay taxes for that. Thanks
Excellent Video, especially STEP2!
Also, step transaction doctrine…wait for one year before converting from traditional IRA to ROTH IRA.
Great video and very clear! One question I have is, when does the aggregation rule apply? At the time of conversion or at the end of the year?
Say I have 100k tIRA now, I contribute 6k post tax $ to a 2nd tIRA, then convert it to Roth IRA. Before end of 2021, I roll my 100k IRA to a 401k. Will that prevent the aggregation rule?
Or
I have to roll my IRA to a 401k now then contribute $6K post tax and convert it.
Also, Step-transaction Doc – I thought it was clarified in TCJA and it makes backdoor roth LEGAL, the timing shouldn't matter anymore?
Skip ahead here!
0:00 – Backdoor ROTH IRA
0:30 – Step 1 – Contribute to a traditional IRA
1:12 – Step 2 – Move all pre-tax IRA's to your current 401K
3:07 – Convert your traditional IRA to a ROTH IRA
Have you successfully done a Backdoor Roth?