Backdoor Roth – Is It Right for You?

February, 2023

Contributing or converting funds to a Roth IRA means you will never pay taxes on those retirement dollars again. To be eligible to make a Roth IRA contribution in 2022 your Modified Adjusted Gross Income (MAGI) must be under $144,000 ($153,000 for 2023) if single and if you’re married and filing jointly, your MAGI must be under $214,000 ($228,000 for 2023).

But what if you make more than these income thresholds? For taxpayers wishing to contribute to a Roth but exceeding these income limits, consider a “Backdoor” Roth conversion. The process to implement this strategy is straight-forward. You can fund an IRA without getting a tax deduction, and then convert the whole amount to a Roth IRA.

Take note: If you have other pre-tax IRA balances, this strategy often does not make sense since some or most of the conversion would then be taxable. Late last year, proposed tax law changes eliminated this strategy. While that particular bill didn’t pass, it could very well happen immediately upon approval in a future bill. Due to tax and regulatory considerations, contact your CWA advisor and your tax-preparer before implementing a Backdoor Roth conversion.

Use this helpful flow-chart to determine if a Backdoor Roth is right for you: Click Here


Disclosures: For informational and educational purposes only and should not be construed as specific investment, accounting, legal, or tax advice. Certain information is based upon third party data which may become outdated or otherwise superseded without notice. Third party information is deemed to be reliable, but its accuracy and completeness cannot be guaranteed. Neither the Securities and Exchange Commission (SEC) nor any other federal or state agency have approved, determined the accuracy, or confirmed the adequacy of this article.