The most prestigious law school admissions discussion board in the world.
|
 |
 
|
Can someone explain to me like I’m 5 how a back door Roth works?
| Karlstacks leaky bussy | 01/17/25 |
| DewarsDude | 01/17/25 |
| Phenotype Czar | 01/17/25 |
| DewarsDude | 01/17/25 |
| Fucking Fuckface | 01/17/25 |
| its over 100k again | 01/17/25 |
| ADA-compliant Monkey Bars | 01/17/25 |
Poast new message in this thread
Date: January 17th, 2025 1:11 AM Author: Karlstacks leaky bussy (http://www.autoadmit.com/thread.php?thread_id=5664801&forum_id=2Elisa#48559560) |
Date: January 17th, 2025 1:36 AM Author: DewarsDude you can't contribute to roth IRA if income is above a certain amount.
so you contribute to trad IRA, then convert it to Roth.
you pay the tax now, but have no taxes on the earnings or withdrawals
hth. |
 |
Date: January 17th, 2025 1:44 AM Author: Phenotype Czar what is the point of the income cap if the loophole has been open for decades, is known about by literally everyone, and is big enough to drive a semi teuck through? (http://www.autoadmit.com/thread.php?thread_id=5664801&forum_id=2Elisa#48559597) |
|
Date: January 17th, 2025 1:48 AM Author: DewarsDude most people don't understand that the only advantage here is if you expect your tax rate to be higher in retirement, which is generally not the case for high earners.
trad IRA allows you to defer taxes for 30+ years
roth IRA requires post-tax money now
the principal paid in tax on a roth grows at the same rate as the tax liability on a trad, assuming tax rates remain constant.
backdoor roth is just a bet that your tax rate now is lower than it will be in retirement. |
|
Date: January 17th, 2025 6:42 AM Author: Fucking Fuckface Another key advantage is that you can remove the principal after 5 years without penalty, even if you're nowhere near the statutory requirements age.
Also, a lot of people who do this earn too much to invest tax deferred dollars into even a traditional IRA. |
|
Date: January 17th, 2025 8:44 AM Author: its over 100k again You can take Roth IRA contributions any time immediately without penalty, but it's the gains you have to wait five years AND be over 59.5 years old or youre taxed like a bitch (http://www.autoadmit.com/thread.php?thread_id=5664801&forum_id=2Elisa#48559890) |
|
Date: January 17th, 2025 6:52 AM Author: ADA-compliant Monkey Bars Assuming you're asking about the mechanics and not the extremely obvious economic benefits: You put the money in the traditional IRA. Once the money is settled in the account you then "switch" the money to your Roth. I think there is a button to do this on most brokerages. If not they will at least have a how-to guide, which may involve calling them. (http://www.autoadmit.com/thread.php?thread_id=5664801&forum_id=2Elisa#48559803) |