Backdoor Roth IRA: Pros, Cons and Examples

If your income exceeds the limits to contribute directly to a Roth IRA, you may have heard of the so-called “Backdoor Roth IRA,” which allows traditional IRA to Roth IRA conversions regardless of income. This allows investors to continue to fund a Roth IRA despite reporting a higher income.

This loophole was set to close when the original Build Back Better Act passed the House in November 2021. As such, many of my fellow tax and financial planners have warned clients not to plan to fund their Roth IRA through the backdoor now , provided that the act would eventually pass and that income limits would be placed on the conversions. There was also speculation that this limit would be retroactive to early 2022, making Roth IRA contributions backdoor as something of a tax-avoidance tradition.

Leave a Reply

Your email address will not be published. Required fields are marked *