The Roth IRA is an incredibly tax efficient investment account, but most high earners are not allowed to make contributions directly. Fortunately, there’s a “back door” into the Roth IRA that can enable many High Net Worth investors to shift assets every year into this tax sheltered account.
Andy Hagans joins Michael to discuss who should be doing a Backdoor Roth, the step-by-step process for executing this tax strategy, and tips for avoiding some of the more common mistakes.
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Episode Highlights
- Discussion of who can and should execute a Backdoor Roth.
- How much wealth the Backdoor Roth can potentially create if executed correctly.
- Step-by-step instructions for executing the Backdoor Roth.
- Discussion of the “pro rata rule” and how investors can avoid triggering it.
- Other common mistakes, and how to avoid them.
- Summary of the risk associated with the Backdoor Roth, both today and in the future.
Episode Resources
- Ultimate Guide To The Backdoor Roth IRA [PDF]
- IRA Conversion Tool
- IRA Scenario Tool
- Sample Form 8606
Today’s Guest: Andy Hagans
About The Tax Efficient Investor Podcast
On the Tax Efficient Investor podcast, we show you how to protect, grow, and transfer your wealth by implementing tax-advantaged investment strategies. Host Michael Johnston demystifies tax strategies that are favored by the most successful and sophisticated investors, including 1031 exchanges, IRA & 401k plans, HSA accounts, trusts, real estate, and more.
