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#travissickle…(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
The Backdoor Roth Conversion is an innovative tool that enables you to convert traditional IRA funds to a Roth IRA. It has become increasingly popular among taxpayers who wish to take advantage of the tax-free benefits of the Roth IRA. However, not everyone can take advantage of the traditional way to convert a traditional IRA into a Roth IRA – thanks to the taxation rules.
Some taxpayers mistakenly believe that they cannot participate in a Backdoor Roth Conversion because they earn too much. In reality, there are no regulations surrounding income, as there were in the past. Anyone can participate in this conversion, regardless of their income. However, stockpiling a large IRA balance can prevent you from a smooth ride. There is no reason to think that you have lost your chance to perform this conversion tax-free.
A last-minute backdoor Roth conversion is a way of contributing to your Roth in the current year, after December 31st of the same year. This is permissible via the backdoor, due to the logic that Roth contributions for the current year can be continued until the tax-filing deadline of the following year. Because this conversion is done well beyond December 31, avoid adding any contributions before the conversion, as they might be subjected to taxes.
It might seem daunting, but the process is relatively easy. Start by opening a traditional IRA account and funding it in full. Next, you’ll need to contact your traditional IRA custodian, asking to convert your traditional IRA to a Roth IRA. You will then transfer your traditional IRA balance to your new Roth IRA account. Voila – you’ve performed a last-minute backdoor Roth Conversion, which will offer you tax-free growth on your converted balance.
The biggest takeaway from all of this is that it is never too late to start thinking about retirement. By taking advantage of a last-minute backdoor Roth conversion, you can take the first steps towards securing your financial future. Even if you feel like you’re behind the curve, a Roth IRA can help you catch up, with contributions well beyond the standard limit for people starting closer to retirement.
In conclusion, availing yourself of the Last Minute Backdoor Roth Conversion is an excellent strategy if you missed out on the previous year’s contribution. The good news is that it’s easier than ever to participate in this conversion, without worrying about incurring any tax penalties. If you’re considering a Last Minute Roth Conversion, speak with your financial advisor for options that are best suited to your situation.
Is there any options in terms of contributing to IRA or something to reduce federal income owed for 2022? Due to W4 forms not being properly adjusted, the projections seem to suggest there will be taxes owed. Appreciate any feedback.
Just like Kevin's question below, I have a question. I just contributed 6000 into 2022 traditional ira and will transfer in a few days to backdoor roth. Can I do the same 6500 after tax contribution for 2023 traditional ira, then transfer again in a few days? Both of these back to back. Or better yet, since transfers aren't contributions, can I just contribute 6000 for 2022, then 6500 for 2023 traditional for a total of 12500, and then do one l transfer of 12500 over to roth?
Thank you @Travis for doing a video on my question and clarifying it.
Based on my understanding, if I rollover my Simple IRA to 401K plan before 12/31/2023, I can do backdoor conversion to Roth IRA for the year 2022 and 2023, correct?
@Travis, would you say inherited IRAs, like 401k accounts, are not part of the year-end pro-rata calc?
Best (clearest) description of this I’ve seen yet, Travis!
So to clarify, one can submit 6k after tax dollars through a non deductible IRA contribution for 2022 up until the tax deadline in April. Use form 8606 to claim the 6k as non deductible and convert the funds into a Roth IRA and invest. Also immediately after one could then take the same approach but with $6500 for 2023 and then file form 8606 in 2024 for tax filing deadline of 2023. Placing 12,500 into a Roth and not pay taxes again since they used after tax money(paycheck or savings). Do you have to wait 5 years to pull out your contributions penalty free if you ever needed the funds inside that Roth IRA acct?