First, you’ll need to open a traditional IRA and make your contribution. You can contribute up to $5,500 per year ($6,500 if you’re over the age of 50). Law firm owners can deduct their contributions from their income, which reduces their overall tax liability.

Once the money is in your traditional IRA, you can then convert it to a Roth IRA. You’ll have to pay taxes on the amount you convert, but the money will then grow tax-free in your Roth IRA. And, because you’ve already paid the taxes on the money, you won’t have to pay any taxes when you withdraw the money in retirement.

This strategy can be a great way to maximize your retirement savings and reduce your overall tax liability. If you’re interested in learning more about the backdoor Roth IRA strategy, talk to your financial advisor or accountant.

At Prestige, we help 6&7-figure firm owners save $15,000 – $75,000 in taxes. We would love to offer you a complementary tax savings strategy call to discuss how much money we can help save you!

Give us a call at 833-672-2268
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LEARN MORE ABOUT: IRA Accounts

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CONVERT IRA TO SILVER: Silver IRA Account

REVEALED: Best Gold Backed IRA

When it comes to saving for retirement, many individuals resort to setting up a traditional IRA or Roth IRA account to help them achieve their financial goals. However, what if there was a way to contribute to a Roth IRA even if you do not meet the eligibility requirements? This is where setting up a backdoor Roth IRA comes into play.

A backdoor Roth IRA allows individuals who may not be able to contribute directly to a Roth IRA due to income limitations to make contributions through a series of steps. Here is a step-by-step guide on how to set up a backdoor Roth IRA.

1. Evaluate eligibility. To initiate the process of setting up a backdoor Roth IRA, you must first ensure that you are not eligible to contribute directly to a Roth IRA account. For the tax year 2021, the contribution limit for a Roth IRA account is $6,000, or $7,000 if you are 50 years or older. Individuals with an income above a certain threshold are restricted from contributing to a Roth IRA directly.

2. Open a Traditional IRA account. Once you have determined that you are ineligible to make direct contributions to a Roth IRA, the next step is to open a Traditional IRA account. There are no income limitations for contributions in a traditional IRA account.

3. Make a non-deductible contribution to the Traditional IRA. After you have opened a traditional IRA account, fund it with a non-deductible contribution within the contribution amounts limit for the current tax year.

4. Begin conversion process. Once you have made a non-deductible contribution to your Traditional IRA, you must initiate the conversion process to move the funds into your Roth IRA account. You can do this either immediately, or it can be done at any time.

5. Pay taxes. Since the funds you are transferring from your Traditional IRA to your Roth IRA have already been taxed, you will not owe taxes on them when you withdraw them. However, if you have earned a return on your included contributions in your traditional IRA account, you will owe taxes when you convert the amount into a Roth IRA account.

6. Record the conversion. Be sure to keep a good record of the conversion process for tax purposes. Report the amount converted on Form 8606 when you file your tax return for the year during which the conversion happened.

In conclusion, setting up a backdoor Roth IRA could be an excellent option for those who are looking for a way to contribute to a Roth IRA account despite the limitations. It is essential to note that the process can be a bit complicated and may require the assistance of a financial advisor. But, with careful planning and understanding of the process, the benefits of a Roth IRA account would undoubtedly make the effort worthwhile.