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Democrats want to cut way back on those ‘backdoor Roths’
Sep 23, 2021 | Yahoo Finance
Picture - Democrats want to cut way back on those ‘backdoor Roths’

Funding a Roth IRA through the “backdoor” has been a favorite move of aggressive savers in recent years.

But the benefit may be much less prevalent if Democrats pass their ambitious multitrillion-dollar budget reconciliation bill.

The backdoor Roth maneuver lets a high-income earners contribute money to a traditional IRA and then convert it into a Roth to skirt income limitations in the Roth program, but still take advantage of the tax benefits. Once the move is made – and the relevant taxes are paid upfront – the retirement account can grow and won't be subject to taxes again (earnings can grow tax-free, and qualified withdrawals are tax- and penalty-free).

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