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Robert A. Imparato, Jr CFP®
CERTIFIED FINANCIAL PLANNER™ professional
Craig A. Hyldahl CFP®
CERTIFIED FINANCIAL PLANNER™ professional
R.I.C.H. Planning Group, LLC
105 Fieldcrest Avenue, Suite #507
Edison, NJ 08837
Robert: 732-326-5240
Craig: 732-326-5240
Fax: 732-326-5331
Robert: robert@richplanninggroup.com
Craig: craig@richplanninggroup.com
Website: www.richplanninggroup.com
September/October 2024
Should You Consider a Backdoor Roth IRA
A backdoor Roth IRA offers a way for high earners to potentially circumvent income limits on Roth IRA contributions. But before you leap on the bandwagon, weigh your decision carefully.
A Key to The Door
Single taxpayers with incomes of more than $161,000 and married filing jointly with incomes of more than $240,000 are not allowed to make 2024 contributions to a Roth IRA. However, you can convert other types of IRAs to Roth IRAs at a current income tax on the converted amounts. The benefit is that assuming the tax bill now is worth it, your Roth IRA can grow tax-free, allow you to take tax-free retirement withdrawals, and have no minimum required distributions during retirement.*The Catch
But tax-free accumulation comes with an administrative burden. Each year you do this, the converted contribution must be placed in a new separate Roth IRA account. Depending on how many years you have until retirement, you could end up with a multitude of separate Roth IRAs.Follow the Rules
With each conversion, be sure to follow regulations carefully to avoid triggering additional tax liabilities. These regulations are subject to change at the discretion of Congress, so it’s important to work with your trusted tax advisor to avoid surprises.On the Other Side
For someone with a relatively short time until retirement, a backdoor Roth IRA could make sense. The backdoor Roth IRA strategy could also be beneficial if you anticipate having funds left in your traditional IRA because you could pass the money on to your heirs in a Roth IRA.For Business Owners
You have other options that may be more attractive. Ask your financial and tax professionals about creating a deferred compensation plan that utilizes life insurance. Properly structured, the plan could reduce your current taxable income and grow tax deferred.Another possibility is a profit-sharing plan based on age demographics that could accrue assets in a way favorable to you.
SUBSIDIZING TRADITIONAL IRA OR 401(K) DISTRIBUTIONS WITH TAX-FREE ROTH FUNDS COULD LOWER YOUR TAX BRACKET, POTENTIALLY REDUCING YOUR SOCIAL SECURITY AND MEDICARE TAXES, WHICH INCREASE AT HIGHER INCOME LEVELS.
*To qualify for tax and penalty-free withdrawals of earnings, a Roth IRA or Roth 401(k) must be in place for at least five tax years, and the distribution generally must take place after age 59-1/2, with a few exceptions.
GE-6734756.1(7/24)(Exp.7/26)
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Duly registered and licensed financial professionals offer securities through Equitable Advisors, LLC (NY, NY 212-314-4600), member FINRA,SIPC (Equitable Financial Advisors in MI & TN), offer investment advisory products and services through Equitable Advisors, LLC, an SEC-registered investment advisor, and offer annuity and insurance products through Equitable Network, LLC (Equitable Network Insurance Agency of Utah, LLC in UT; Equitable Network of Puerto Rico, Inc.). Equal Opportunity Employer - M/F/D/V. Equitable Advisors and its associates and affiliates do not provide tax, accounting, or legal advice or services.
R.I.C.H. Planning Group, LLC is not owned or operated by Equitable Advisors or Equitable Network. GE-6572038.1 (4/24)(Exp. 4/26)
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