Backdoor Roth IRA in 2022 – What, Why and How

In this video, we’ll explain what is backdoor Roth IRA, what is Roth IRA, what is traditional IRA account, and why you should or should not bother with backdoor Roth IRA conversion due to the build back better bill. We’ll explain how to put money into your backdoor Roth IRA account by converting your after tax money to backdoor Roth IRA account from traditional IRA account. We’ll explain the Roth IRA and traditional IRA contribution limit and income limit to contribute to Roth IRA for single filer and married filing jointly.

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Time Code:
0:00 – Intro
0:24 – What is Roth IRA and what is Backdoor Roth IRA?
02:14 – Why backdoor Roth IRA? Build back better bill
02:40 – how to contribute money into backdoor Roth IRA?

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CONVERT IRA TO SILVER: Silver IRA Account

REVEALED: Best Gold Backed IRA

A Backdoor Roth IRA is a type of retirement savings account that allows individuals to contribute after-tax dollars to a traditional IRA and then convert those funds into a Roth IRA. This strategy is popular among high earners who are not eligible to contribute to a Roth IRA due to income limits.

What is a Backdoor Roth IRA?

A Backdoor Roth IRA is a way for individuals to enjoy the tax-free growth and withdrawals of a Roth IRA, even if their income exceeds the limits for direct contributions. To create a Backdoor Roth IRA, individuals make non-deductible contributions to a traditional IRA, then convert the funds to a Roth IRA. The conversion does not trigger a tax bill because the original contributions were already taxed.

Why use a Backdoor Roth IRA?

A Backdoor Roth IRA can be an effective way for high earners to save for retirement while minimizing taxes. In a traditional IRA, contributions are tax-deductible, but withdrawals are taxed at the time of distribution. In a Roth IRA, contributions are made with after-tax dollars, but withdrawals are tax-free. By using a Backdoor Roth IRA, individuals can enjoy the tax-free growth and withdrawals of a Roth IRA, even if their income is too high to qualify for direct contributions.

How to set up a Backdoor Roth IRA?

To set up a Backdoor Roth IRA, individuals must first make non-deductible contributions to a traditional IRA. This can be done online or through a financial advisor. Once the contributions are made, individuals must then convert the funds to a Roth IRA. This can also be done online or through a financial advisor.

It’s important to note that any pre-tax contributions in a traditional IRA will complicate the Backdoor Roth IRA strategy because taxes must be paid on all conversions based on the proportional balance of pre-tax and after-tax dollars in all of your IRAs.

In conclusion, a Backdoor Roth IRA is a tax-efficient way for high earners to save for retirement. By making non-deductible contributions to a traditional IRA and then converting the funds to a Roth IRA, individuals can enjoy the tax-free growth and withdrawals of a Roth IRA, even if their income is too high for direct contributions. If you’re considering a Backdoor Roth IRA, it’s important to consult with a financial advisor to learn more about how it works, how much you can contribute, and what tax implications you may face.