[Music] The good news is we are living longer But saving for retirement is a big Concern for many Americans even those Who are considered high earners Sometimes if your income is considered Too high though you might miss out on Some great savings options that's where Something called a backdoor Roth IRA Comes in I want to bring in CBS News Business analyst oh there you are Jill Slesinger to talk more about this Program okay first of all what is a Backdoor Roth IRA how does it differ From a traditional Roth IRA okay we have to go back even a Step Beyond that because we have to talk About the difference between a Roth and A traditional IRA or retirement plan so Remember with a traditional plan you put Money into an account you get a tax Deduction today it grows without any Taxation and then later when you retire You pull the money out that's when you Pay the taxes a Roth is different in That you pay the tax that's due today on The money you earn you put the money Into the account it grows without any Taxation but when you take it out later In life you pay no tax and so it's a Very powerful tool for people who Believe and I believe this as well that Tax rates are likely to go up in the Future but as you said there's a
Limitation to who can use a Roth IRA so To be able to contribute to a Roth Ira You have to make as a married couple Less than 230,000 or if you're a head of household Or a single filer less than $146,000 that of course makes a lot of Sense because the government doesn't Want to necessarily give lots of these Benefits away but with a back door what You can do is you can make a Contribution into a traditional IRA but Not take a tax deduction so you Basically say here's money into an IRA Account I don't want a tax dedu today And you can put your $7,000 in for this Year 8,000 if you're over 50 and then Immediately you can convert it into a Roth so it's a non-deductible IRA today And two minutes later after the money Goes in you convert it and it's a Roth That's why it sounds sort of sneaky it's A back door but it is perfectly Legitimate and perfectly legal H okay I Got it all out and so you were just Talking a little bit about you know who Applies or who could benefit most from Them uh is it just That earning uh that that we Detailed well look I mean the thing About a Roth is that it is a powerful Tool especially if you're let's say like Today you're earning as a couple $250,000 which is a lot of money I get
It okay but if you think that you're say Um young married doctors young married Professionals even two teachers who are Going to earn more over time you might Be worried that you won't be able to Actually take advantage of the Roth and That's why the the the back door can be Very powerful I should also point out These income limitations it only has to Do with an IRA so one great idea and I Talk about this all the time on my Podcast is if you have a Roth option Through your workplace plan through your 401k or your 403b that is not income tested so a lot Of people don't realize this you could Be using a Roth option through your Workplace plan and not even mess around With the door rough huh so have uh let's Talk about interest rates we uh keep Discussing when are they going to come Down if they will and what's going on With them um have these high interest Rates impacted how much people are Saving for Retirement you know it kind of depends I Think that um lower income earners People who are earning say you know Middle to low end uh let's call less Than $100,000 a year I think a lot of Those people are still struggling under The weight of inflation it's harder to Put money away on the other hand you Know we've heard a lot about people who
Are working in places where they've Never had a retirement plan before so Even if they're carrying highin interest Loans they might have a workplace plan Where the boss says hey if you put 5% of Your pay in that's not that much we'll Match it so there are some instances Where even if there are higher interest Rates people are able to put more money Away simply by being part of a workplace Plan I mean look nobody likes High Interest rates if you are borrowing Money or you're one of the people who's Got outstanding credit card debt but Remember Savers are really seeing sweet Interest rates on their savings accounts And their CDs so a lot of those people Are finding that hey the safe money I Put aside that's earning money I can Afford to put a little bit more money Away into my retirement account Jal Slinger thank you for all of that advice Appreciate it
