ROTH IRA INCOME LIMITS REMOVED | How to do a Backdoor Roth IRA Step-by-Step Tutorial

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Want to do a Roth IRA but make too much money? This video is for you. You’ll learn about the Backdoor Roth IRA. A “Backdoor” Roth IRA is a technique to get around the income limits for a Roth IRA, so it’s effectively as if the ROth IRA income limits are removed. Wondering if it’s legal? Yes--in 2018 Congress “blessed” this Backdoor Roth IRA approach.

This video is going to walk you through the steps for how exactly to do the Backdoor Roth IRA. I use Vanguard and share my screen recordings so you can follow along. I’ll also talk about a big warning you need to know before you attempt the Backdoor Roth IRA, and answer some questions you might have.

Just quickly, the benefits of a Roth IRA are that your money grows tax free and will not be taxed when withdrawn. This is because the money you put into a Roth IRA doesn’t result in a tax deduction.
To contribute the maximum to a traditional Roth IRA, you cannot have a modified adjusted gross income of:
$206,000 or above for a couple filing jointly
$139,000 or above for individuals
So, if your modified adjusted gross income is above that, then KEEP WATCHING because the “Backdoor” Roth IRA could be perfect for you!

For 2020, the contribution limit to all of your traditional and Roth IRAs is $6,000 (or $7,000 if you’re 50 or older).
This is important to know before you try to do a “Backdoor” Roth IRA.
You cannot have money that is tax-deferred in an IRA. That means, you cannot have money in a traditional IRA, Simple IRA and SEP IRA. This is because if you do have money that is tax-deferred in an IRA, you will be subject to a “pro-rata” calculation that can essentially counteract the benefits of the “Backdoor” Roth IRA. So, if you want to do the “Backdoor” Roth IRA, you’ll first need to make sure that you do not have any money that is tax-deferred in an IRA.

One thing that’s great to note is that you can do a backdoor Roth IRA for your spouse too!

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Disclaimer: I am not a financial advisor. Although I am a lawyer by profession, I am not your lawyer and no attorney-client relationship is established with you in any way. This video, and the ideas presented in it, are for entertainment purposes only and should not be construed as financial or legal advice.