Many a high-income professional who earns too much to make a direct Roth IRA contribution will need to use the backdoor to make a Roth IRA contribution of $6,000 or $7,000 (if age 50 or over).
As someone who fields multiple questions a day on the topic at the end of one year and beginning of the next, I felt it would be great to push this list of frequently asked questions about the backdoor Roth to the general public.
– So, what’s the point of all this?You make too much money, fancy pants high earner, to get a tax deduction from a traditional IRA contribution. However, you can still make a non-deductible contribution.
However, once it comes time to remove that money, the gains are taxed as income.So you got no deduction on the way in, you did get tax free growth over the years, but the gains are taxed on the way out. Not the most efficient choice.too much money to directly contribute to a Roth IRA.