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The biggest loophole in the US Tax Code?
If you think you make too much income to contribute to a ROTH IRA, you might be right.
It just doesnât matter...
Thereâs another way to get that tax-free goodness.
***Thread***
If you think you make too much income to contribute to a ROTH IRA, you might be right.
It just doesnât matter...
Thereâs another way to get that tax-free goodness.
***Thread***
ROTH Conversion
To be easily confused with that tax âstrategyâ not to be named (âbackdoor Roth...â). Okay, itâs the same damn thing, letâs just stop calling it that!
There is no income limit on converting a traditional IRA to a ROTH IRA.
There is no income limit to...
To be easily confused with that tax âstrategyâ not to be named (âbackdoor Roth...â). Okay, itâs the same damn thing, letâs just stop calling it that!
There is no income limit on converting a traditional IRA to a ROTH IRA.
There is no income limit to...
...contributing to an a traditional IRA (just a limit on getting a deduction for it).
If you want a ROTH IRA, tax free growth, and no tax on withdrawals at 59.5; but you make too much money, here are three easy steps:
If you want a ROTH IRA, tax free growth, and no tax on withdrawals at 59.5; but you make too much money, here are three easy steps:
1) Contribute to a traditional IRA - just max it - $6k.
2) Wait a reasonable period of time (hotly debated).
3) Convert the investments to a ROTH IRA.
Invest, trade, DRIP, whatever you want and never pay any tax on anything that happens in it or when pulling cash out at 59.5.
2) Wait a reasonable period of time (hotly debated).
3) Convert the investments to a ROTH IRA.
Invest, trade, DRIP, whatever you want and never pay any tax on anything that happens in it or when pulling cash out at 59.5.
Rinse and Repeat as often as once a year with a fresh $6k.
Do it for your spouse, too. Thatâs $12k per year!
Some brokerages make it so easy they leave the traditional IRA with the zero balance open so you can repeat without a new setup.
Downsides & Risks:
Do it for your spouse, too. Thatâs $12k per year!
Some brokerages make it so easy they leave the traditional IRA with the zero balance open so you can repeat without a new setup.
Downsides & Risks:
If you withdrawal funds from a conversion within five years there is a 10% penalty. So donât do a conversion on any cash you need in the next five years.
Other than a 401k, if you have any other tax deferred retirement accounts (other IRAs, etc), converting an IRA, actually...
Other than a 401k, if you have any other tax deferred retirement accounts (other IRAs, etc), converting an IRA, actually...
..triggers tax on a piece of the others if there are built in gains.
If you just have a 401k and the IRA you are going to convert and a ROTH, then this isnât a problem.
Time between IRA contribution and conversion. Hot topic - no formal guidance - none of the rules say this...
If you just have a 401k and the IRA you are going to convert and a ROTH, then this isnât a problem.
Time between IRA contribution and conversion. Hot topic - no formal guidance - none of the rules say this...
...but there could be a position that because your intent was to have a ROTH before you contributed to the traditional and your Income is too high, that you should mash all the steps together and you just made a disqualified ROTH contribution.
Thereâs no formal guidance on this.
Thereâs no formal guidance on this.
MANY reputable CPAs, Tax Attorneys, and Financial planners use this strategy as there is nothing in the law that prohibits it.
I just want you to know the risk is out there, but google around on it. The strategy is widespread.
As always, questions welcome.
I just want you to know the risk is out there, but google around on it. The strategy is widespread.
As always, questions welcome.
