Robert Brokamp: I want to talk a little bit about the back door Roth, something we’ve talked about pretty regularly here in the program. First of all, Roth is particularly appealing these days because we have tax rates that are at the lowest levels we have seen in decades, and tax rates are likely to increase in the future. In fact, they will definitely increase by the end of 2025, because that’s when the 2017 tax breaks expire.
Plus, with budding federal budgets, underfunded social security, underfunded Medicare, most people expect tax rates to rise. One way to protect your pension from higher tax rates is a Roth. You can contribute to a Roth in a few ways. First of all, if you have a Roth 401 (k) at work – or a Roth 403 (b), Roth TSP if you are a federal employee – you can always contribute to Roth. There are no income limits on Roth 401 (k), 403 (b), TSP. There is income limits on the Roth IRA. If you earn a certain amount, you cannot contribute to the Roth IRA.
So there’s this trick called the back door Roth IRA. You contribute to a non-deductible Traditional IRA, and then you convert to a Roth. Now there was discussion maybe a month or two ago that Congress should remove the back door Roth. So there was a lot of talk about making your back door Roth now while you can. Well, the latest version of Build Back Better, Bill or Plan, whatever they call it, has removed it. So it looks like the back door Roth is safe for now.