The Backdoor Roth IRA

When your adjusted gross income is too high ($186,000 for married couples filing jointly in 2017), your ability to make a contribution to a Roth IRA is phased out. You can’t make a contribution. But there’s a backdoor way to make a Roth IRA contribution when you’re a high income taxpayer. The method works and you can use it to put a lot of money into a Roth IRA in a short time. This article gives details.

Roth dollars are key to building a tax-free bucket of wealth to manage taxes in retirement, minimize Medicare surcharges, and provide a tax-efficient legacy to your heirs. A Roth IRA grows tax-free—as opposed to tax-deferred. You can always access your contributions, and earnings come out tax-free too once you reach 59 ½ (for converted dollars, you have to have had the Roth open five tax years). Your heirs will have to take withdrawals but they get to take them over their lifetimes and they come out income-tax-free. “The best thing to inherit is someone else’s Roth IRA,” says Rodgers.