dirtbiker
Full time employment: Posting here.
- Joined
- Apr 11, 2019
- Messages
- 630
I've been working on maximizing my tax strategy as of late, and I have some questions. We're both fairly young, in our mid-thirties with plans to retire in our mid to late 50s.
My wife and I are both maxing out our 401Ks and we're also dumping money into a brokerage account with each paycheck. We're over the income limits to contribute to a Roth IRA. And because my wife has a defined benefit plan at her job, we're also subject to income limits for a traditional IRA, and we're over those limits as well to contribute to a traditional IRA with pre-tax money.
So, with this being said, I recently found out about backdoor Roths. As I understand it, you contribute to a traditional IRA (in our case, it would already be taxed contributions), and then roll it over into a Roth IRA, which you can do once per year. Any interest, dividends, etc. that were earned would then be taxed. There is no income limits to doing this. Is this understanding correct? And to me, it makes no sense to contribute to a brokerage account that is fully subject to taxes if I can do a backdoor Roth with my after-tax income and keep this money from the tax man. And my wife and I can both do this backdoor Roth, right?
The second part of my question involves contribution limits. The IRA contribution limits are $6000 per year. Are these the limits for tax-deferred contributions? Or are they hard limits? IOW, since all of my contributions will be taxed contributions, can I contribute any amount I want?
And lastly, I rolled over my old 403B from my previous employer into a rollover IRA this year. Does this count as my one allowed IRA rollover for the year? Meaning I wouldn't be able to do a backdoor Roth this year?
Thanks!
My wife and I are both maxing out our 401Ks and we're also dumping money into a brokerage account with each paycheck. We're over the income limits to contribute to a Roth IRA. And because my wife has a defined benefit plan at her job, we're also subject to income limits for a traditional IRA, and we're over those limits as well to contribute to a traditional IRA with pre-tax money.
So, with this being said, I recently found out about backdoor Roths. As I understand it, you contribute to a traditional IRA (in our case, it would already be taxed contributions), and then roll it over into a Roth IRA, which you can do once per year. Any interest, dividends, etc. that were earned would then be taxed. There is no income limits to doing this. Is this understanding correct? And to me, it makes no sense to contribute to a brokerage account that is fully subject to taxes if I can do a backdoor Roth with my after-tax income and keep this money from the tax man. And my wife and I can both do this backdoor Roth, right?
The second part of my question involves contribution limits. The IRA contribution limits are $6000 per year. Are these the limits for tax-deferred contributions? Or are they hard limits? IOW, since all of my contributions will be taxed contributions, can I contribute any amount I want?
And lastly, I rolled over my old 403B from my previous employer into a rollover IRA this year. Does this count as my one allowed IRA rollover for the year? Meaning I wouldn't be able to do a backdoor Roth this year?
Thanks!