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What Is a Backdoor IRA?

As Todd Campbell explains in this Motley Fool article, there’s no such thing as an official backdoor Roth IRA.  Because high-income earners cannot directly contribute after-tax money to a Roth IRA, they must fund one through the backdoor approach.  Note, traditional IRAs have no income limit for contributions.  They can be converted into Roth IRAs.  Thus, individuals can fund a traditional IRA with nondeductible contributions, and then later convert the account into a Roth IRA.  This maneuver is commonly called the backdoor Roth IRA.  It allows high-income earners to get the same Roth IRA benefits as everyone else.  However, it is only for those who file income taxes jointly and have household income above $193,000 in 2019.  Read the full piece by Campbell here.

 

 

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