A Backdoor Roth IRA conversion isn’t as complicated as it may sound. And if you are someone who has a traditional #IRA and want to convert your traditional IRA to #Roth IRA it will only take a few steps, but the bigger concern cold be the #taxes you pay. Including a special tax rule (and more complicated) called the Pro Rata Rule.
00:00 – Start
00:22 – Roth IRA Income Limits
1:09 – Why Do BackDoor Roth IRA?
2:05 – Steps For Roth IRA Conversion
5:03 – Paying Taxes
5:58 – Pro Rata Rule
8:39 – Time Limitations
8:59 – Who’s This For
9:29 – Who Should Avoid This
10:16 – Final Thoughts
Be sure to check out MaxRewards and receive receive 1 month of MaxRewards Gold for free:
🔥 Waller’s Wallet YouTube Channel Member:
📈 WeBull Free Stock:
💸 Wealthfront Fee Free Money Management: bit.ly/Wealthfront-5k
💵 Easy Money Signing Up For Wealthfront Checking: bit.ly/Wealthfrontchecking
💵 Get Easy Money Signing Up For Sofi Money:
📰 Subscribe to my newsletter:
Support Waller’s Wallet when shopping at Amazon:
My Camera Equipment:
Canon M50:
Lighting:
Main Mic:
Shotgun Mic:
Switchpod Tripod:
Colored Background lights:
iPad Pro:
Magic Keyboard:
Airbnb – Get $40 off your first booking-
Rakuten – Get $10 when you sign up –
Social Media:
FaceBook Group:
Twitter:
Instagram:
Advertiser Disclosure: Many of the listings that appear on this website are from companies which we receive compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). The site does not review or include all companies or all available products.
The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.
19 comments
1st!! Very good info here, Dustin!
Very informative! 🙂
This is informative to the point in considering converting my employee match down the road.
Solid FIRE topic! I probably will have to start doing this starting next year.
Is it possible to contribute to a traditional IRA, not take the tax deduction, then convert to backdoor Roth IRA and avoid paying taxes from conversion?
🏴☠️
Risky trade boiz.
I like that you are branching out from the CC topics.
This is a really great topic, the benefits can be huge for your retirement as long as you can take the upfront hit when you convert.
Taking the small steps to contribute to tax advantaged accounts can add up to sizable chunks over time! Great walk through Dustin! 😊
This stuff is so complicated. My company lets you donate after tax money where you can opt to auto convert to a Roth. I’m glad I have this option.
I swear you are making videos based off my personal weekly google search! This is at least the third time I looked up a topic and 2 days later, you upload a video on it. Welp, thank you for the timely content!
I had to get my traditional to $0, so I made the decision to convert the entire balance last year and this year. Boy, I owe(d) my a$$ in taxes this year and even more next year. You're right – talk to a tax advisor. Initially, I was frustrated. But, like you said – it's not a bad problem to have. If you have a financial planner, it also makes it easier since they take care of all the forms. 😀
Good video! The actual act of converting is easy. It gets complex if you plan for and avoid pro rata, account for asset protection planning, etc. I avoid pro rata with a self-employed 401k. Instead of following traditional advice of rolling over into a traditional IRA, I rollover into my SE 401k. Being "self-employed" isn't a big hurdle, >99% of my income from an employer. Even better, my wife is a participant in my SE 401k plan and use it to avoid pro rata for her backdoor. I suggest reading learning asset protection if planning ways to avoid pro rata. It gets tricky because laws vary by state! I discussed some of this in a video on 401k rollovers.
Wow! Thanks Dustin for summarizing all this information, I just hit the income limit for Roth IRA contributions and was looking for a TLDR version of Backdoor Roth info.
You can’t merely refrain from taking a deduction for your traditional IRA contributions. You must file Form 8606 or the IRS won’t recognize your contributions as being post-tax.
Getting well versed in investing knowledge! Way to go with this one as it will help many people. Take care Dustin and happy investing!
We’ve done backdoor Roths for years! Love that the majority of my retirement won’t be taxed when I take it out!
Hi Dustin! I have 100% non tax deductible in IRA and I have been doing back door to Roth IRA for past 2 years. Is it ok to hold 1 share of VTI in IRA to keep account open? Secondly, can you or any else talk about the 8606 form and when it will be posted and what you need to do when you file your tax?
Why has this high quality channel not pop yet 🙂 🙂