How to setup a Backdoor Roth IRA in Fidelity

Backdoor Roth IRAs are great. They folks who don’t normally qualify for a Roth IRA still take advantage of one! I mean, who doesn’t want to have their money grow tax free?

And Fidelity makes it super easy! If you have questions, they can walk you through it on the phone too! It takes 10 minutes and a couple of days to have your account funded, and voilà! You're one step closer to financial independence and retirement!

0:00 - 2:22 Roth IRA Limits
2:22- 4:38 Using Traditional IRA for Backdoor Roth
4:38-8:30 Why a backdoor IRA
8:30-11:06 Setting up a backdoor Roth Conversion In Fidelity

Let’s just do a quick recap of some FAQs on the Backdoor Roth IRA:

Who can do a Backdoor Roth?
In theory, anyone can do it, but it’s meant for people who don’t qualify to make contributions to a Roth IRA because their income is too high. You can find the cutoffs for contributing to a Roth here thanks to Fidelity: https://bit.ly/34ZjLPD

How do Backdoor Roth IRAs work?
It takes advantage of a traditional IRA. There are no income limits that prevent you from contributing to a traditional IRA, so you could always open one of those up and contribute money to it and let your money grow tax-deferred (you’ll pay taxes on it when you take money out later in life). But they’ve got income cutoffs as well that prevents you from being able to deduct them from your income. You can find those cutoffs here: https://bit.ly/34NGC0J What that means that if you make too much to deduct that money from your income, it becomes pretty useless since you’ll be contribute money into your traditional IRA that’s already been taxed. The Backdoor Roth gets around that by letting you quickly ‘convert’ your traditional IRA contribution to your Roth IRA.

Is the Backdoor Roth IRA illegal?
Nope! The Tax Increase Prevention and Reonciliation Act of 2005 permitted conversions of nondeductible traditional IRA contributions into Roth IRAs starting in 2010. If you check our the specific IRS documents on Roth IRAs, you’ll see it in the footnotes!

Will I need to open both a Roth IRA and a Traditional IRA?
Yup! You will need both (and yes, you can have both). You can see how to do that here:
How to open a Roth IRA - https://bit.ly/3kbTfZG
How to open a Traditional IRA - https://bit.ly/3lSQihr

Why should do a Backdoor Roth IRA?
It lets your after-tax money grow tax free. Plus, you get all the perks of the Roth IRA:
➤ No penalty on early withdrawals of your earnings/rollovers for qualified expenses if it’s been 5 years.
➤ No required minimum distributions when you’re in your 70s

A MUST READ TO LEARN HOW TO BUILD WEALTH & INVEST:
Rich Dad Poor Dad by Robert Kiyosaki - https://amzn.to/3rLHjSX
I will teach you to be rich by Ramit Sethi - https://amzn.to/3pCvsoe
Millionaire Next Door by Thomas J. Stanley - https://amzn.to/2JAnGfl

Related Blog Posts:
How do I pick between a Traditional vs. Roth IRA? Part 1: https://bit.ly/3iRNwqX
How do I pick between a Traditional vs. Roth IRA? Part 2: https://bit.ly/2REPSOm
How do I pick between a Traditional vs. Roth IRA? Part 3: https://bit.ly/3el0QBt

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