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Old 07-11-2018, 04:25 PM   #1
cman
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Backdoor Roth IRA

Anyone done it?
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Old 07-11-2018, 05:57 PM   #2
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Quote:
Originally Posted by cman View Post
Anyone done it?
Friend of mine does it. I'm looking into it, spoke with one financial advisor.

Not really sure there's any risks there.
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Old 07-11-2018, 06:10 PM   #3
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I'm trying to wrap my mind around the benefits.
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Old 07-11-2018, 10:04 PM   #4
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There are reasons for doing it and some things to look out for, so either do some searching online for the process and the do's and dont's and cautions. One thing to bear in mind, if you do a back-door Roth and have other traditional IRA's, Simple IRA's, etc. there is what is called a prorata rule. This means you cannot avoid taxation on some of the conversion, even though you convert the funds in the account you just funded as a traditional IRA. For tax purposes, you prorate the amount converted over all these accounts which means some of the conversion will be taxable.
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Old 07-12-2018, 10:01 PM   #5
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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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Old 07-13-2018, 01:17 AM   #6
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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.
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Old 07-13-2018, 07:45 AM   #7
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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.
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Old 07-13-2018, 10:24 AM   #8
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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 .
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Old 07-13-2018, 08:30 PM   #9
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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.
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Old 07-13-2018, 09:44 PM   #10
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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.
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