The theme this week is the backdoor Roth IRA strategy. If you make too much money to qualify to make a Roth contribution in 2019, don’t fret. There is a little-known strategy called the backdoor Roth, that will still allow you to make Roth contributions. 

Here’s how it works: You make a non-deductible or after-tax IRA contribution to your Traditional IRA. There aren’t income limits on conversions from a Traditional IRA to a Roth IRA, so you can then turn around and convert that contribution to a Roth. Bam. Done. Take that Uncle Sam!

If this all sounds too complicated for you, that’s ok, because I have another solution for you: just take advantage of your Roth 401k plan at your work. If you work somewhere that offers a 401k, chances are good that there is also a Roth option that would allow you to save up to $25,000 in your Roth 401k in 2019 and not mess with any of these quirky Backdoor Roth strategies. 

That’s what I’ve been doing since I became eligible for a 401k plan for the first time in 2007 - putting as much money as I could into my Roth 401k every year, and it’s worked out great. 

So if you have access to a Roth 401k plan through your work, and you won’t be able to max that out anyways, you may just want to keep it simple and forget about the backdoor Roth IRA strategy all together. 

But plenty of you listening don’t have access to a Roth 401k at your work, and in that case, the backdoor Roth strategy is a compelling choice when your income is too high to qualify for a Roth. 

That’s it for today. Thanks for listening. Tomorrow, we’re going to recap the week and I’m going to give you a little preview of next week’s theme. 

My name is Ashley Micciche and this is the One Minute Retirement Tip.

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