Back Door Roth Ira Conversion Calculator

A method that taxpayers can use to place retirement savings in a roth ira even if their income is higher than the maximum the irs allows for regular roth ira contributions.

Back door roth ira conversion calculator.

First place your contribution in a traditional ira which has no income limits. The roth ira conversion calculator shows you whether it might be worth converting your traditional ira to a roth ira. Also gain further understanding of roth iras experiment with other retirement calculators or explore hundreds of other calculators covering finance math fitness health and many more. Roth conversion calculator methodology general context.

For instance if you expect your income level to be lower in a particular year but increase again in later years you can initiate a roth conversion to capitalize on the lower income tax year and then let that money grow tax free in your roth ira account. As a reference in 2014 you could contribute up to 6 500 a year and if you are 50 or older you could add an additional 1 000. Contributions are deducted from your income on your tax return. Free inflation adjusted roth ira calculator to estimate growth tax savings total return and balance at retirement with the option to contribute regularly.

The calculator takes into account whether you pay your conversion taxes out of ira proceeds or pull them from other sources. A backdoor roth ira allows taxpayers to contribute to a roth ira even if their income is higher than the irs approved amount for such contributions. Then move the money into a roth ira using a roth conversion. An ira is an individual retirement account where you receive a tax break for contributions today but pay taxes on withdrawals in retirement.

Converting to a roth ira may ultimately help you save money on income taxes. The roth conversion calculator rcc is designed to help investors understand the key considerations in evaluating the conversion of one or more non roth ira s i e traditional rollover sep and or simple iras into a roth ira but it is intended solely for educational purposes it is not designed to provide tax advice and the. Ira and roth ira basics. The conversion would be part of a 2 step process often referred to as a backdoor strategy.

It is for directional purposes only. Return to iras faqs. The conversion is reported on form 8606 pdf nondeductible iras. More the complete guide to the roth ira.