The MAGI limit is $125K for a Roth IRA and $68K for Trad IRA. This means with only 2 years of work experience under my belt, I won’t be able to invest in either account type for 2022.

However, everyone here seems to be investing in IRAs at much higher income levels (e.g., engagement managers, principals). Can someone explain this? I’m very confused.

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I didn’t think traditional post tax IRAs had a cap?

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They don’t have a cap on in me and you can still contribute, however, the contribution is just not deductible in the current year and creates basis (Form 8606) in the account. Still a benefit to make a Traditional IRA contribution because the earnings continue to grow tax-deferred. Or you can make the Traditional contribution and back door it into a Roth IRA.

No income limit to contribute to traditional IRA. I think the limit comes in for tax deduction purposes for married filing jointly at $125k, but anyone at any income can contribute the $6k (or $7k for catch-up contributions).

likehelpful

Isn’t the limit for a Roth IRA contribution?

You can do backdoor investing once you pass certain income thresholds

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You can always contribute to a traditional IRA. However, as your MAGI increases, your ability to deduct contributions decreases, effectively making the IRA worse than a brokerage account (eventually).

Roth IRA also has a MAGI limit where you can no longer contribute.

The workaround for both of these issues is the backdoor Roth. There is still a bill out there that would eliminate it, but my guess is that it will not pass for 2022 at this point.

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I have $3k that Fidelity helped me convert to a Rollover IRA (originally a trad 401k from previous employer, 2021). I read that you have to have an empty trad IRA by the end of the year in order to convert to a backdoor Roth. Is that true? Can I still do a backdoor Roth if I just create a second trad IRA account to deposit post-tax $ then convert?

Or should I wait to transfer the Rollover IRA/prev 401k funds into my new employer's 401k, which leaves the IRA acc $0 and then deposit? But it's March now, so does the 'end of year' rule still apply?

Should specify that I’m single and have a 401k as well, hence those limits

Useful, but 401k doesn’t have an income limit, and the 401k saving limit doesn’t affect IRA.

A2 There is no way to do a mega backdoor if your employer does not offer it, correct?

Unfortunately no

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