Back Door Roth Ira Conversion Calculator

First place your contribution in a traditional ira which has no income limits.

Back door roth ira conversion calculator.

It is for directional purposes only. 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.

The calculator takes into account whether you pay your conversion taxes out of ira proceeds or pull them from other sources. Then move the money into a roth ira using a roth conversion. 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. 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 ira conversion calculator shows you whether it might be worth converting your traditional ira to a roth ira. See publication 590 a contributions to individual retirement arrangements iras for more information. Ira and roth ira basics.

The conversion is reported on form 8606 pdf nondeductible iras. Roth conversion calculator methodology general context. But make sure you understand the tax consequences before using this strategy. Return to iras faqs.

The conversion would be part of a 2 step process often referred to as a backdoor strategy. 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. Free inflation adjusted roth ira calculator to estimate growth tax savings total return and balance at retirement with the option to contribute regularly. A conversion to a roth ira results in taxation of any untaxed amounts in the traditional ira.