10 financial planning tips for starting 2019 right

Some taxpayers may want to look into a unique angle on Roth and IRA contributions, as outlined by PFP Executive Committee member David Desmarais, CPA/PFS: “For married couples with modified adjusted gross income over $203,000, you cannot make direct Roth contributions. However, there are no income limitations on doing a Roth conversion or nondeductible IRA contribution. So, you can make a nondeductible IRA contribution and immediately roll it over into a Roth. I just got back from my local investment management branch and made my wife’s and my $6,000 IRA contributions (up from $5,500 last year). As soon as the check clears, I will roll the funds into our Roth IRAs (called a ‘backdoor Roth contribution’).”

“The reason why you roll it over immediately is if there are no earnings in the IRA before it is rolled into a Roth, there is no income to pick up on the conversion,” he explained. “This doesn’t work if you have other traditional IRAs that have untaxed earnings (whether it be from unrealized gains or prior deductible IRA contributions), because you have to aggregate all of the IRAs when determining the amount of the taxable conversion.”

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