Have you been under the impression that you make too much money to contribute to a Roth IRA? Well Tom and Brendan want to let you know that you do not. In this week’s Mullooly Asset Management video Tom and Brendan discuss how investors can still contribute through a backdoor Roth conversion. If you make more than the Roth income limits that doesn’t mean you can’t invest your money in a Roth IRA. Most people are unaware of this fact though, and that is why it is the topic of this video. Tom and Brendan briefly cover the history of traditional IRA’s in this video. They also outline the creation of Roth IRA’s, and why people stopped contributing to IRA’s for a while because of the income limits.
There are several basic steps involved with a backdoor Roth conversion. The first step is contributing to a traditional IRA. This traditional IRA can then be converted into a Roth IRA. There will be taxes on the difference between the value of the traditional IRA balance and the amount converted into the Roth conversion. If you do the conversion immediately, there shouldn’t be any taxes. Performing a backdoor Roth conversion is really quite simple, but one thing investors should be aware of is the Pro-Rata Rule. Tom talks about the Pro-Rata Rule at the end of the video. If you have always thought you couldn’t contribute to a Roth IRA because of you income, you should definitely check out this week’s Mullooly Asset Management video.
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