Saturday, December 21, 2019

For people earning a lot during their career but not planning to earn much

For people earning a lot during their career but not planning to earn much when they reach retirement age, this isn’t a big deal. Their tax rates will be low when they’ve reached retirement age, so paying income taxes on the money they take out of a traditional IRA in retirement won’t take a big bite out of their income. For those people, a traditional IRA is perfect.

The problem comes when someone is still earning a lot in retirement and wants to take money out of their traditional IRA. They’re going to pay a lot in taxes. Those are the people that a “backdoor Roth IRA” is going to help.

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This is really only a good idea

This is really only a good idea if you’re very concerned about high taxes in retirement or if you’re extremely young and can bank on your i...