Backdoor IRA - can someone explain the real benefits for me?

General
21

Bailey said:
@Rex
If you can’t contribute directly to a Roth IRA, you also can’t deduct contributions to a traditional IRA. That’s the whole reason for a backdoor Roth.

I didn’t mean a traditional IRA specifically. I was referring to a traditional 401k, which does allow deductible contributions. If OP hasn’t maxed this or an HSA, those could be options.

22

@Rex
This is just you trying to sound smart. Realistically, people using a backdoor Roth are already maxing their 401k. This “depends on tax brackets” argument is kind of moot here.

23

Halston said:
@Rex
This is just you trying to sound smart. Realistically, people using a backdoor Roth are already maxing their 401k. This “depends on tax brackets” argument is kind of moot here.

OP asked what they might be leaving on the table - this is the answer. You can’t assume they’ve maxed out everything without them saying so.

24

@Rex
Didn’t realize that the info about maxing out 401k and HSA was important. I’ll update my question.

25

Wilder said:
@Rex
Didn’t realize that the info about maxing out 401k and HSA was important. I’ll update my question.

Good move! Yes, that’s a key part of the info.

26

Rex said:

Wilder said:
@Rex
Didn’t realize that the info about maxing out 401k and HSA was important. I’ll update my question.

Good move! Yes, that’s a key part of the info.

Thanks! Living below my means helps me make this possible (hardly ever eat out, own a small condo).

27

Backdoor IRA lets you stash more cash in retirement even if your income is high.

28

It’s only $7k - clearly it’s valuable since the government limits it.

29

A backdoor Roth is for people who make too much to deduct IRA contributions or contribute directly to a Roth. With an IRA, you’d get taxed on withdrawal. With a Roth, you’re taxed once and withdraw tax-free.

30

It’s not about Roth vs. tax-deferred. It’s about getting more into tax-advantaged accounts. When you’re over the IRA limit, you should be maxing 401k and HSA, then using a backdoor Roth for additional retirement savings.

31

Roth gains aren’t taxed at all - ever.

32

Quick question - can I contribute max to a deferred account and still do $7k to a backdoor Roth if I’m over the income limit? Like max out the 401k and still add $7k through a backdoor Roth?

33

Follow-up question. Do people do a backdoor Roth each year or save it up for later? I recently went over the income limit and haven’t done a backdoor before.