Insights from Saad, VP of North America

Wahed Editors

 

What is a Back Door Roth?

A backdoor Roth is a conversion of Traditional IRA assets to a Roth IRA for those individuals who don’t normally qualify for contributing due to exceeding the income limits. 

 In order to set up a backdoor Roth, you must have earned income like wages or self-employment income to be able to make a non-deductible IRA contribution. The funds you contribute in a back-door Roth are considered ‘converted funds’ not ‘contributions’ to a Roth, if you’re under the age of 59½ you will need to wait five years to be able to have penalty-free access to your funds. This is different from directly contributing to a Roth IRA.

 

Income and Contribution Limitations in 2019 vs 2018

 

  1. Roth IRA Income Limitations: In 2019, if your modified Adjusted Growth Income (MAGI) is $137,000 (single) or $203,000 (married filing jointly or qualifying widow[er]), you may not contribute to a Roth IRA. (In 2018, those limits are $135,000 (single) and $199,000 (married filing jointly or qualifying widow[er]). These limits do not apply to Roth IRA backdoor conversions.

 

  1. Roth IRA Contribution Limitations: Starting in 2019, you may contribute only $6,000 ($7,000, if you are age 50 or over) to a Roth IRA. (The 2018 limits are $5,500/$6,500.) With a backdoor Roth IRA conversion, these limits do not apply. 

You can contact a Wahed representative to discuss your Wahed IRA or visit the IRS website for more information on IRA eligibility.

 

 

Retirement Account Rollover

Do you have a 401K/403B from a previous employer? If so, contact a Wahed representative to learn more about how you can take advantage of a Rollover IRA and invest your funds in a Halal diversified portfolio. Keep in mind, there are NO tax implications to rolling over your previous retirement account.

Disclaimer

2 Comments

  • Hamza

    Does Wahed Invest support the backdoor Roth IRA contribution? For example, if we have a traditional and Roth IRA with Wahed?

  • Wahed Editors

    Hello Hamza,

    We appreciate your interest in Wahed! Your details have been forwarded to our Senior Account Executive and we’ll reach out to you shortly to answer all your queries related to our retirement accounts. Thank you!

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