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Is there even a difference between traditional IRA and Roth?

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  • Avatar KrisRichter 
    Participant
    Status: Physician
    Posts: 1
    Joined: 08/05/2019

    I’m sure you’ve answered this somewhere here but I can’t find the answer. I am a hospitalist/physician advisor in CA. Like most of you I make too much to deduct my IRA contributions from my taxes (ie my IRA is all money that’s already been taxed). My understanding is there is some way that if you never deducted any contribution to it from your taxes, then you don’t pay taxes at withdrawal. So how is that any different than a Roth IRA?

    #236351 Reply
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 8134
    Joined: 01/09/2016

    You’re talking about a backdoor Roth IRA. Maybe you just haven’t used the right search terms because it is discussed extensively on this site. Also see:

    Welcome to the forum!

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #236385 Reply
    Liked by Nysoz
    SerrateAndDominate SerrateAndDominate 
    Participant
    Status: Physician
    Posts: 487
    Joined: 02/01/2018

    Big difference. Read up on links regarding backdoor Roth.

    Earn everything.

    #236386 Reply
    Avatar Peds 
    Moderator
    Status: Physician
    Posts: 4442
    Joined: 01/08/2016

    And what do you think happens to the gains tax wise?

    #236387 Reply
    Faithful Steward Faithful Steward 
    Participant
    Status: Financial Advisor, Small Business Owner
    Posts: 517
    Joined: 06/12/2017
    So how is that any different than a Roth IRA?

    Click to expand…

    With a non-deductible Traditional IRA, at retirement, you will pay taxes on the portion of your withdrawal attributable to growth. So, if you contributed $100,000 in non-deductible contributions, over the course of your working years; and the account grew to $300,000. Then you would pay taxes on 66.67% of ever distribution.

    On the other hand, if you make those same contributions to a non-deductible IRA and then immediately convert it to a Roth IRA. You’ll pay no taxes on the distributions.

    Backdoor Roth IRA Strategy is a powerful concept. Hope this helps!

    By the way, welcome to the forum.

    Michael Peterson, CFP® | Faithful Steward Wealth Advisors
    https://ProsperousPhysician.com | (717) 496-0900

    #236417 Reply
    Avatar Peds 
    Moderator
    Status: Physician
    Posts: 4442
    Joined: 01/08/2016
    I’m sure you’ve answered this somewhere here but I can’t find the answer.

    Click to expand…

    also search the bogleheads wiki, theres usually an answer hiding somewhere

    https://www.bogleheads.org/wiki/Non-deductible_traditional_IRA

    #236429 Reply

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