Backdoor IRA’s

Submitted by alberto vega on Sat, 2019-11-23 19:10

Can you explain what is a backdoor IRA
How does it apply to Roth IRA, traditional deductible IRA, non-deductible IRA’s
What are the advantages of each
Are there restrictions or limits on withdrawals



Submitted by Alan - IRA critic on Sun, 2019-11-24 18:57

  • The back door Roth is simply a two step process to make a Roth contribution if your MAGI (income) is too high to make a regular Roth contribution. You make a non deductible TIRA contribution and immediately convert it to a Roth IRA. If you do not have any other non Roth IRA balance, this is quite simple except that you must report the ND contribution on Form 8606 and also the conversion.
  • However, if you DO have other non Roth IRA balances the above conversion would be mostly taxable. To avoid the taxes you must roll your pre tax IRA balance into an accepting employer plan, usually at your current employer, and that plan must accept IRA rollovers. Eliminating the pre tax balance from your TIRA will allow the conversion of the ND contribution(s) to be tax free. If your employer plan will not accept IRA rollovers, then you would usually pass on the back door method.

Submitted by alberto vega on Fri, 2019-11-29 18:53

Therfore if customer has other non Roth Ira balances such as TIRA, and employer plan does not accept IRA rollovers, ther is no backdoor Roth IRA conversion possible?

Submitted by Alan - IRA critic on Sat, 2019-11-30 22:33

No. If there are no other non Roth IRA accounts, then the backdoor conversion is easy. Just make the non deductible TIRA contribution and convert it right away.

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