I'm hoping you guys can clarify something for me. As of the current moment, I only have a Roth IRA. I'm single.
In the near future, let's say I'm self-employed, my private practice is a professional corporation, and I make $350,000 per year. My financial goal is to put away 25%, or $87,500, into retirement each year.
I contribute the max $53,000 to my solo 401k. I contribute $5,500 to my Roth IRA. I contribute $3,350 to a HSA. That's a total of $61,850. That leaves $25,650 of savings to be invested.
If I save $25,650 in a traditional IRA, when I go to do a backdoor Roth IRA next year, what happens? Because of the pro-rata rule, I'd be paying taxes on 25,650/31,150= 82% of the amount each year, right?
I guess I'm not seeing how you guys manage to put away $5,500 via the backdoor Roth method each year without getting hammered by the pro-rata rule. Am I missing something?
In the near future, let's say I'm self-employed, my private practice is a professional corporation, and I make $350,000 per year. My financial goal is to put away 25%, or $87,500, into retirement each year.
I contribute the max $53,000 to my solo 401k. I contribute $5,500 to my Roth IRA. I contribute $3,350 to a HSA. That's a total of $61,850. That leaves $25,650 of savings to be invested.
If I save $25,650 in a traditional IRA, when I go to do a backdoor Roth IRA next year, what happens? Because of the pro-rata rule, I'd be paying taxes on 25,650/31,150= 82% of the amount each year, right?
I guess I'm not seeing how you guys manage to put away $5,500 via the backdoor Roth method each year without getting hammered by the pro-rata rule. Am I missing something?
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