Resources

2020 Roth IRA Guidance

From the desk of Naoko McKelvey, CFP®

You have until July 15th to make your 2020 Roth IRA contribution. If you exceed the income limitations for making a Roth IRA contribution, the potential to tax-efficiently fund a Roth IRA may still exist. Under the “Backdoor Roth IRA strategy” you make a nondeductible traditional IRA contribution and then convert the contribution to a Roth IRA. In order for the IRA conversion to not create any tax liability it is critical that you not have an existing traditional IRA with a balance. The reason is that the taxability of the conversion is determined by the percentage that after-tax contributions represent of the total traditional IRA balance. The fact that you have money in a company retirement plan (such as a 401(k)) does not impact the ability to do the “Backdoor Roth.”

Reach out to your Financial Advisor or tax preparer before the extended 7/15/20 tax-filing deadline for specific requirements.