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Topic Review (Newest First)
11-28-2018 01:15 PM
fangard
Quote:
Originally Posted by cman View Post
Thanks Mike. Adjusted gross income went over limit beginning in 2016. I got an extension on the return so CPA didn't notice until late 2017. 2017 it remained over limit and won't be going down so I need a new strategy.
I'm 50 and I'll retire in around 5 yrs. I'll see if accountant can help me on strategy and I'll ask if backdooring roth is the way to go for me. I think my tiny brain is beginning to understand the concept enough to discuss with him.


Make sure you don’t have another IRA. If so, it doesn’t work effectively from a tax standpoint. Any conversions you do will take into consideration the other IRA and there will be a prorated tax due.
08-19-2018 09:10 PM
Highflier Been doing the back door Roth for several years.
Only thing to be mindful of is when you put your money into the IRA initially, do nothing with it until after you convert to the Roth.
For that reason, I make a single deposit into the IRA and once it post, I convert to the Roth.
Idealy, you do not want to have any gains while it is in the IRA to avoid tax complications.
07-15-2018 08:48 AM
monark I did one last year at the advice of my Fidelity 401K advisor. Money set in the traditional IRA until it cleared then I moved to Roth IRA. Took about a week.
07-13-2018 11:14 PM
MikeV Gotcha. Makes sense now. Then it sounds like the backdoor Roth will be perfect for you, at least for the next five years! Well done if you are retiring at 55.


That is such a stupid rule, the income limitation on being able to get a Roth. And particularly when you are normally below the limit, fund one, then late in the year have unexpected income (pipeline easement, lease bonus, sell some timber, etc.) In my mind, we should be encouraging people to set aside as much as we can, not discouraging it.
07-13-2018 09:44 PM
cman
Quote:
Do you remember the reason your accountant gave you that you will no longer qualify for a Roth IRA after 2017? Unless you are going to be over the income limit, and as long as you have earned income, you should be good to go. There are no age restrictions on funding a Roth IRA like there is with a traditional IRA. However, the backdoor Roth strategy will not work if you are over 70 1/2 since the initial contribution is to a traditional IRA which would then be converted to a Roth under the backdoor Roth scenario.
Thanks Mike. Adjusted gross income went over limit beginning in 2016. I got an extension on the return so CPA didn't notice until late 2017. 2017 it remained over limit and won't be going down so I need a new strategy.
I'm 50 and I'll retire in around 5 yrs. I'll see if accountant can help me on strategy and I'll ask if backdooring roth is the way to go for me. I think my tiny brain is beginning to understand the concept enough to discuss with him.
07-13-2018 08:30 PM
MikeV
Quote:
Originally Posted by cman View Post
Thank you fishingcatcher.
I kind of understand the concept and found it researching options after my accountant told me I no longer qualify for roth after 2017- but he didn't suggest a back door roth.

I think what I am struggling to understand is whether I will have a higher tax bracket now or when I retire. When I stop working, it seems like I'd have a much lower bracket. Yet in the link you provided it gives the example of a 15% tax bracket now vs. a 28% at retirement. It would seem that'd be reversed.

I like managing my portfolio alone. I need to spend more time with my accountant on tax strategies but find conceptualizing them very difficult.
Do you remember the reason your accountant gave you that you will no longer qualify for a Roth IRA after 2017? Unless you are going to be over the income limit, and as long as you have earned income, you should be good to go. There are no age restrictions on funding a Roth IRA like there is with a traditional IRA. However, the backdoor Roth strategy will not work if you are over 70 1/2 since the initial contribution is to a traditional IRA which would then be converted to a Roth under the backdoor Roth scenario.
07-13-2018 10:24 AM
fishingcacher Each person's case is unique. I have a pension (annuity) so converting does not make as much sense. I will eventually be forced to make withdrawals under RMD at 70.5. I am waiting for Trump to seek reelection by promising a tax-free conversion .
07-13-2018 07:45 AM
K LoLo
Quote:
Originally Posted by cman View Post
Thank you fishingcatcher.
I kind of understand the concept and found it researching options after my accountant told me I no longer qualify for roth after 2017- but he didn't suggest a back door roth.

I think what I am struggling to understand is whether I will have a higher tax bracket now or when I retire. When I stop working, it seems like I'd have a much lower bracket. Yet in the link you provided it gives the example of a 15% tax bracket now vs. a 28% at retirement. It would seem that'd be reversed.

I like managing my portfolio alone. I need to spend more time with my accountant on tax strategies but find conceptualizing them very difficult.
One of the reasons of having a Roth is because you're not taxed on the earnings in the future. It's kind of a hedge against the unknown. We don't know the government is going to do with taxes over the next X years. Seems like taxes almost always end up going up eventually. So even if you're bracket right now is taxed 15%, that same bracket/income earning area could be taxed at 28% in the future.

Of courses, taxes could go down a ton, but who really thinks that will happen? It is just a hedge. I have a 401K and a Roth IRA, so different future tax strategies on retirement. Just trying to balance them and hope for the best.

I do put most of my money into 401K though, because my company matches 5%, and I get the tax benefit from that now.
07-13-2018 01:17 AM
cman Thank you fishingcatcher.
I kind of understand the concept and found it researching options after my accountant told me I no longer qualify for roth after 2017- but he didn't suggest a back door roth.

I think what I am struggling to understand is whether I will have a higher tax bracket now or when I retire. When I stop working, it seems like I'd have a much lower bracket. Yet in the link you provided it gives the example of a 15% tax bracket now vs. a 28% at retirement. It would seem that'd be reversed.

I like managing my portfolio alone. I need to spend more time with my accountant on tax strategies but find conceptualizing them very difficult.
07-12-2018 10:01 PM
fishingcacher
Quote:
Originally Posted by cman View Post
I'm trying to wrap my mind around the benefits.
It is a way to contribute to a Roth IRA even if you do not qualify for a Roth IRA.

https://www.nerdwallet.com/blog/inve...-how-to-guide/
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