How to contribute to a ROTH IRA at ANY income level!
Want the ability to fund a ROTH IRA at ANY income level???
But your Fitness Business is killing it and so you were told that you can't use a ROTH IRA...
You are in luck!
The strategy is called:
BACKDOOR ROTH
It requires a few steps, but even if you are a high income business owner (or employee)...you can make a ROTH IRA contribution....through the backdoor.
The problem with "Regular" ROTH IRA contributions...
…the ROTH IRA is NOT allowed if you make more than $144,000 (single) or $214,000 (married couple)…..UNLESS you use the "Backdoor ROTH" IRS Loophole.
How to does it work:
Important Note: I will now oversimplify this process so please consult a financial professional to help you with this so you don't overlook something and trigger unforeseen taxation or penalties.
STEP 1
Check if you have any Traditional IRAs, SEP IRAs, or SIMPLE IRAS (pre-tax money)…if the answer is YES, do NOT proceed, call your Financial Planner or Tax Advisor bc of the “Pro-Rata Rule” (would make this article too long, but this is a major pitfall to this strategy)…if all your money is in 401Ks and NOT any IRAs…pro-rata rule will not apply
STEP 2
Place your After-Tax dollars in a “Non-Deductible Traditional IRA”… this is important!
I recommend that the money be alone in an account that is only after-tax dollars (simple reason - will get complicated and also potentially result in more taxation)
STEP 3
Do a ROTH Conversion as a Trustee to Trustee Direct Rollover before 12/31/22
Now your money is in a ROTH IRA!
Need help?
Best
Pat
Disclaimer: Please use this as article as education only and speak to your Financial Professional and/or Tax Professional to confirm this is the right strategy for you and your business.