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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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