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Recommendations for a Roth IRA?
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If you are doing a backdoor conversion when you are supposed to, there is no reason not to do it.
This becomes your option when you make too much money to deduct your tIRA contributions and are phased out of Roth IRA contributions entirely. So you're left contributing to a tIRA with after tax dollars that are not deductible.
Option 1: You leave the money in the tIRA. The money will grow and grow until retirement and then you pay taxes on all of those thousands of dollars of gains.
Option 2: You immediately do a backdoor conversion and convert the funds to a Roth IRA. Since there were no gains while the money was in the tIRA, you don't have any taxes to pay. The money is now in a Roth IRA and will grow and grow. When you withdraw it on retirement, you don't owe taxes because it's Roth funds.
All things equal with no cost to convert, obviously you would choose Option 2, the backdoor conversion. It's a whacky backdoor loophole.
Right that’s what I think also. Like an extra tax you pay because you are not in the know.
For me what tips the scales is knowing that tax bracket rates will be higher in the future. Even Obama thought 150k-250k per year was “rich” and it’s likely only going to trend that direction long term.
How much $ do you think you'll have in retirement accounts at age 70?
I only ask for purposes of RMD, where you could be required to withdraw 200k+ if you still had large balances. Point being that you could still be withdrawing 150k+ per year in retirement, even at 55-60. And though you won't be in 32% bracket, using Roth funds could be the difference between being in the 24% vs 12% for example. Ideal for us is max traditional 401k since we are also in 32% bracket. Then since we are saving so much in taxable accounts anyways, back door Roth it to get untaxed income in future.