The Backdoor Roth IRA is a savvy strategy used by high-flying tech professionals to maximize their retirement savings, regardless of their income levels.

This guide offers a streamlined checklist and a step-by-step approach to help you navigate the intricacies of Backdoor Roth IRAs, leading you to tax-free retirement growth.

“Roth IRAs are a very powerful means to grow your retirement nest egg tax-free, but contributing to them as a high earner can be tricky. I wrote this to demystify the Backdoor Roth IRA strategy and to empower you to plan with confidence.

Enjoy!”

-Dan from Tailored Cents

⭐ Is a Backdoor Roth IRA Suitable for You?

📈 Step #1 Contribute to a Traditional IRA.

🔍 Ensure Proper Execution of Your Traditional IRA Contribution

🔃 Step 2: Convert your Traditional IRA to a Roth IRA.

📝Ensure Accurate Reporting of Your IRA Conversion

📝 Form 1099-R

📝 Form 1040

🔒 Securing Your Roth Conversion's Tax-Free Status

📝 Form 8606

🥛☕ The Cream & The Coffee Considerations

🔍 😶‍🌫️ Backdoors and the Legend of the Lost Basis

🗣️🤝🗒️ Oral History, Meet Documentation

📖 Resources

⭐ Is a Backdoor Roth IRA Suitable for You?

Before getting started, let’s think it through– do you really need the complicated Backdoor Roth dance?

While it’s an instrumental technique for high earners, there are plenty of instances in which it’s not a fit.

<aside> 💡 Each financial situation is unique; three of the most common reasons a Backdoor Roth might not be a fit include:

You’re below the Roth income contribution limits. If your MAGI is less than $138,000 (filing individually), don’t sweat the technique– you can contribute directly.
You’re unshakeably confident your tax rates in the future will be significantly lower than your tax rates today. Roths tend to shine in higher-tax situations.
You have illiquid financial circumstances where you can’t pay the taxes due upon converting from Traditional to Roth. </aside>

Amount of Roth IRA Contributions That You Can Make For 2023 | Internal Revenue Service

If you’ve thought through the following and it’s a go– great!

Here are a few more specific nuances to chew through.

Do you have existing IRA balances that could complicate the conversion, including in SIMPLE and SEP accounts?

Will the timing of any rollovers and previous IRA contributions also complicate your current year’s tax filing situation?