How to Protect Your Retirement Savings with a Backdoor Roth IRA
Everyone needs the basic tools to build their wealth and prepare for a comfortable retirement.
But Nurse Anesthetists need more than just the basics.
Given their career trajectories and earning potential, CRNAs require a savvy financial and retirement strategy that uses each retirement savings tool in the most effective way possible.
For many, the challenge isn’t just saving for retirement, it’s also about protecting those savings from extensive and unnecessary taxation.
This requires a particular strategy that goes beyond your basic retirement saving tools and takes a deeper look at one specific retirement saving product – the Roth IRA.
A Roth IRA is an individual retirement account where taxes are not deferred. Unlike a 401(k) or a traditional IRA, these products are for saving post-tax equity.
Here’s why that’s a good thing:
- Your dealing with knowns. Because you pay your tax on this income here and now, you won’t have to speculate about the amount of tax you will pay in the future.
- Your contributions to a ROTH IRA are after-tax dollars now. The growth of the account is not subject to taxation and withdrawals are tax-free.
- A Roth IRA is a genuine reflection of assets that you can use. Generally speaking, what you have in the Roth IRA is what you keep.
Yes, Roth IRAs have great benefits, but there are limits too, especially for high-income investors.
In 2019, a single filer earning $137,000 or over was not eligible to contribute to a Roth IRA. Married jointly filers were ineligible if they earned over $203,000. For CRNAs whose income potential is likely to surpass the contribution level a Roth IRA, this reality is frustrating and seemingly unfair.
But there is a solution.
Currently, the IRS has permitted a simple tactic that allows high-income earners to benefit from a Roth IRA. This is called a Backdoor Roth IRA.
Here’s the strategy:
STEP ONE: Deposit money into a traditional IRA
STEP TWO: Convert the IRA to a Roth IRA
STEP THREE: Pay the taxes on all IRA deposit(s) as well as any accumulated interest.
Although surprisingly straightforward in principle, the logistics of Backdoor Roth IRA will vary from person to person. To ensure that the process is done correctly, it’s essential to consult an experienced financial advisor.
When done right, a Backdoor Roth IRA can help CRNAs maximize their retirement savings and protect their assets, all at the same time.
Want to learn more about Backdoor Roth IRAs and how they can work for you?
Here’s a free comprehensive chart that shows you the process: MY BACKDOOR ROTH IRA
Or, book a free consultation with CRNA Financial and Retirement Planning. We’ll help you utilize the benefits of a back door Roth IRA so you can feel confident in a saving strategy that works best for you.
It’s time to be savvy about your tax-saving strategy. Prepare today to enjoy tomorrow.