The Backdoor Roth IRA 2024

Hi folks,

It's that time of year again. Time to do a backdoor Roth IRA contribution! I wrote a long, detailed post about this two years ago, which you can find here.

So does this even apply to you? If you're single and you expect your modified adjusted gross income (MAGI) in 2024 to be less than $146,000, you can ignore this post and proceed with a normal Roth IRA contribution. However, if you do expect it to be this amount or more, then I would recommend visiting the post above on how to do a backdoor Roth IRA contribution.

But Mandeep, what if I'm not single? No worries compadre; I got you. Sadly, the IRS has stopped publishing their lovely blue tables, so I had to get this table (below) from Fidelity (which you can find here). This table describes the income limits for a regular Roth IRA contribution. If you have a MAGI that corresponds to a "partial contribution" or "not eligible," you'll want to do a backdoor Roth IRA contribution.

Long story short, you'll want to follow the summary below, which I copied as pasted from my original post above.

Summary

Pre-Work

1. Clear out SEP, SIMPLE, rollover, and traditional IRAs by rolling them over to another account (401k, individual 401k, etc).

Week 1 of new year

1. Contribute full amount to traditional IRA (TIRA) on first business day of new year.

2. Wait a few days for funds to settle from bank to brokerage house.

Week 2 of new year

1. Convert to Roth IRA and purchase index funds immediately (VTSAX).

Post-Work

1. Submit IRS form 8606 when you file taxes.

2. Pour yourself a nice glass of whisky. You earned it.

While Roth IRAs are fantastic, it's important to have a strong foundation in personal finance education. How can you get all of the battle-tested, tried and true knowledge as quickly as possible? I wrote a book explaining exactly this; it's short; it's 99 cents, and it's written in plain English. You can find it here: https://www.amazon.com/Tangibles-Six-Figure-Millennials-Personal-Building-ebook/dp/B09M6PSBGK/. You may also want to consider subscribing to this blog by entering your email on the homepage next to the “Never Miss a Post” section and following the podcast “Nondelusional Investing” wherever you get your podcasts.

Is there anything you found useful or that I missed above? If so, please leave a comment in the comment box below.

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See you on the next one!

Best,

Mandeep