February 6, 2025 • 10 mins
Discover how the Backdoor Roth IRA strategy can help high-income earners enjoy tax-free growth and withdrawals in retirement. In this podcast, we’ll break down how the Backdoor Roth IRA works, why it’s a powerful tax planning tool, and how it benefits business owners and self-employed individuals. Whether you’re focused on tax-free growth, long-term savings, or advanced retirement planning, this approach is a game-changer for entrepreneurs and high-income professionals alike.
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*Disclaimer This material & presentation content is for informational and educational purposes only. This material and presentation content is designed to provide general information regarding the subject matter covered. It is not intended to serve as legal, tax, or other financial advice related to individual situations. Because each individual’s legal, tax, and financial situation is different, specific advice should be tailored to the particular circumstances. For this reason, ...
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
I'm going to show you how you can have $792,000 in
tax-free income using a backdoorRoth IRA conversion.
If you're a business owner ornot a business owner, this will
work for you.
So stay tuned and the bestthing, you can actually start
implementing this strategy rightaway in your life.
(00:22):
Ready, let's get going.
Speaker 2 (00:24):
Welcome to the Tax Reduction Podcast for
Money-Making Entrepreneurs withBoris Mushaev strategy right
away in your life.
Ready, let's get going.
Owner can save money on taxesis by using proactive tax
strategies, and this podcast isall about saving you money on
(00:47):
taxes.
Boris will share with youin-depth and easy to understand
tax reduction strategies thatyou can implement in your
business within 30 days or less.
Let's jump into today's episode.
Speaker 1 (00:58):
All right, awesome, let's get started on this tax
strategy.
By the way, my name is BorisMoshe, I'm a CPA and a tax
strategist, and I help businessowners save tons of money in
taxes, but not only I help themfind ways to have tax-free
income in the future.
This is one of those taxstrategies, so to speak, so
let's dive right into it.
So, before we get into it, howcan you build tax-free income?
(01:20):
In this example, we're going touse how you can build $792,000
in tax-free income having abackdoor Roth IRA.
We really need to understandwhat is a Roth IRA and how does
the backdoor work.
Okay, now we're going to focuson two types of individual
retirement accounts.
This has nothing to do withyour business, okay Traditional
(01:41):
IRA and Roth IRA.
If you are a business owner andyou have a 401k, a solo 401k, a
SEP IRA, simple IRA, doesn'tmatter.
If you've got some retirementaccount for the business,
phenomenal, continue using it.
You can still use the backdoorRoth IRA to grow tax-free income
.
Now let's understand what isbackdoor Roth IRA.
(02:03):
Before we understand backdoorRoth IRA, let's break it down
into two individual retirementaccounts.
We've got traditional IRA andwe've got Roth IRA.
There are some differencesbetween them and it's really,
really important to understandthem.
Traditional IRA you put moneyinto an individual retirement
account and you get a taxdeduction Because you get a tax
deduction.
Irs says when you retire,you're gonna.
(02:24):
Because you get a tax deduction, irs says when you retire,
you're going to pay us incometax on it, okay.
Roth IRA it's after tax dollars.
You don't get a tax deductionfor contributing to Roth IRA.
So when you do retire, whatevermoney was earned in that
account is completely tax-free.
So again, traditional youtraditionally put the money in,
you get a tax deduction.
(02:45):
You pay tax on it when youretire.
Rough IRA non-traditional putthe money in no tax deduction
and tax-free income when youretire.
Now to put money intotraditional IRA generally there
are no income limits, meaning tosay you can put the money into
traditional IRA anytime,regardless of how much money you
earn.
(03:05):
Now there are some limitationsif you've got money of excuse me
retirement account from yourbusiness or whatever that is.
But the point that I'm trying tomake, whether you have
retirement account or not,you're not prohibited for
putting money into traditionalIRA Whether you're going to get
a tax deduction or not.
That's a different story.
But the point is you're notprohibited to opening
(03:26):
traditional IRA account,regardless of how much money you
make and putting money intothat account With the Roth IRA.
You're actually prohibited todirectly contributing money to
Roth IRA if your income limitsexceed threshold.
So if you're a singleindividual, your income is more
than $161,000, you're prohibitedfrom putting money directly
(03:47):
into Roth IRA.
Or if you're married individualwith $243,000, you're
prohibited from putting moneydirectly into the Roth IRA.
That's why we have a backdoorRoth conversion.
That means we are prohibiteddirectly putting money into the
Roth IRA because we exceed ourincome limit, but we're not
prohibited from putting moneyinto a traditional IRA, doesn't
(04:11):
matter what the income limit is,because with traditional IRA
you can put the money in.
And then we have this amazingtax law and the code that says
you can do what's calledbackdoor Roth conversion.
From the backdoor, you can goahead and convert it to Roth IRA
because that conversion has noincome limits.
It doesn't matter how muchmoney you make and you're
(04:32):
contributing it to a Roth IRA.
We're going to talk about anexample over here, but that is
really what backdoor Roth is andthe reason why it's called
backdoor and why it worksbecause, again, you're
prohibited putting money intotraditional, but you're not
prohibited.
Excuse me, vice versa.
You're not prohibited intotraditional, but prohibited into
(04:52):
Roth.
So we put the money intotraditional and convert it to
Roth IRA.
How much can you put awayannually?
$7,000.
And if you are over the age of50, you can put away $8,000 and
do what's called a catch-upcontribution.
So these limits are for bothtraditional and Roth IRA.
Let's talk about a practicalexample how to do this, how to
(05:14):
do it in a financial institutionthat you're working with.
How it's going to example howto do this.
How to do it in a financialinstitution that you're working
with.
How it's going to work, howit's going to grow tax-free
income right after this break.
Speaker 2 (05:21):
If you have a tax preparer and you do not have a
tax advisor, the only way youcan save money on taxes is by
using proactive tax planningstrategies that only a tax
advisor can give you.
Bora's put together a free PDFfor you, the business owner
Seven tax write-offs every Scorporation business owner must
know.
In this PDF you can find seventax strategies that you can
(05:44):
start using in your business toinstantly start saving money on
taxes.
Click on the link in thedescription below for a free
download.
Speaker 1 (05:52):
All right, awesome, let's get started.
By the way, if you have notbeen using this strategy, which
is backdoor Roth IRA, up untilthis point, please definitely
speak to your tax advisor.
Be like hey, I just want tomake sure I'm doing it right.
There's no tax implications.
Even though Boris said this isgood to go, I want to confirm
with you can we do this?
Definitely implement this.
And if you've got a taxpreparer that just puts the
(06:13):
right numbers in the right boxes, you don't have a real tax
advisor.
Please do yourself a favor, doyour financials a favor.
Get yourself a tax advisor Now.
Let's go into this example righthere.
So how does this work?
You're like all right, boris,great, I want to use this
strategy.
I'm definitely over the incomethresholds.
What do I need to do next?
(06:34):
Now, what you need to do nextis open up two accounts.
You need to open a traditionalIRA and you need to open a Roth
IRA.
Now, there's a lot of financialinstitutions that let you do
that.
You can open both.
Some financial institutionscharge you money, some of them
don't.
It's up to you who you choose,but all financial institutions
(06:55):
have an option in their app, onthe phone or on the online
platform to open both and do aRoth conversion.
It's a very famous thing.
This is not like something thatwas just created yesterday.
Okay, open traditional account.
Let's say you are within theincome limits or over the income
limits, excuse me.
Go ahead and put the money intotraditional IRA and then
(07:16):
convert that traditional IRA, doa Roth IRA conversion and
transfer it $7,000 to Roth.
You might say, boris, am I goingto pay tax on that conversion?
Because a lot of people ask methat, Boris, aren't I going to
pay tax?
The answer is no Because, let'ssay, right now, in a year 2025,
.
The answer is no because, let'ssay, right now, in a year 2025,
(07:40):
you put $7,000 in, you don'tget a tax deduction.
Okay, because you didn't evenfile your taxes yet and you're
converting it right away.
So you never paid taxes on it,so you're not going to pay taxes
on the conversion.
You're doing it with the sameyear.
Now, in the situations where youare going to pay tax, is that,
let's say, you had traditionalIRA all these years.
You have $100,000 in there andyou're like you know what?
I want to have a tax-freeincome in the future from this
(08:01):
$100,000.
I am going to convert what Ialready had before this year
into a Roth IRA.
On that conversion you're goingto pay tax.
Why?
Because when you were puttingthe money into the traditional
IRA originally in the past, youwere getting a tax deduction.
So that's why you would pay taxon that.
But in our scenario we're doingit for the same tax year $7,000
(08:25):
to traditional backdoor Rothconversion to a Roth IRA.
Now if we go through an example,let's say you do this for 30
years.
So 30 year old business owner,you do it for the next 30 years
until your age of 60, $7,000 foryourself Okay, and $7,000 for
your spouse if your spouse worksin the business Okay.
(08:45):
So we're just going to use oneindividual, in this case 30
years, $7,000 a year.
Assume 8% earnings annually.
Now that has been like theaverage market rate, I think
right, like on a veryconservative side.
So we're just going to useeight percent compounded
annually in 30 years it's goingto turn into 792 000.
(09:07):
Now, whether you are anon-business owner or business
owner, if you do backdoor, don'tdo backdoor roth, but just
contributing money into roth irafor the next 30 years, seven
thousand dollars a year.
It's going to turn at 8%,$792,000.
Out of the 792,.
Only 210,000 was your originalcontribution from your own money
(09:29):
and $582,000 was earnedtax-free.
Now if you do this for yourself$582,000 in tax-free plus the
210, of course then you can dothis for your spouse.
That's another $792,000.
You can do it also for yourchildren that's another tax-free
income.
You can absolutely use Roth IRAto your advantage.
(09:53):
Make sure that you're speakingto your tax advisor, looking at
wide variety of options puttingmoney away into retirement,
getting a tax deduction but atthe same time, having a
retirement account for which youwill not pay taxes on when the
money that you pull out atretirement.
Definitely speak to your taxadvisor.
Thank you so much and I hopethis was helpful.
Speaker 2 (10:14):
That's it for today's episode.
Be sure to check out thedescription below for some free
tax reduction resources thatBoris put together for you.
If you're ready to work with atax advisor on your tax planning
, be sure to schedule your callby heading over to
wwwtaxplanningcallcom.
That's wwwtaxplanningcallcom.
And be sure to subscribe to ourpodcast to be notified when the
(10:36):
next strategy is released.
I'm going to show you how you can have $792,000 in
tax-free income using a backdoorRoth IRA conversion.
If you're a business owner ornot a business owner, this will
work for you.
So stay tuned and the bestthing, you can actually start
implementing this strategy rightaway in your life.
(00:22):
Ready, let's get going.
Speaker 2 (00:24):
Welcome to the Tax Reduction Podcast for
Money-Making Entrepreneurs withBoris Mushaev strategy right
away in your life.
Ready, let's get going.
Owner can save money on taxesis by using proactive tax
strategies, and this podcast isall about saving you money on
(00:47):
taxes.
Boris will share with youin-depth and easy to understand
tax reduction strategies thatyou can implement in your
business within 30 days or less.
Let's jump into today's episode.
Speaker 1 (00:58):
All right, awesome, let's get started on this tax
strategy.
By the way, my name is BorisMoshe, I'm a CPA and a tax
strategist, and I help businessowners save tons of money in
taxes, but not only I help themfind ways to have tax-free
income in the future.
This is one of those taxstrategies, so to speak, so
let's dive right into it.
So, before we get into it, howcan you build tax-free income?
(01:20):
In this example, we're going touse how you can build $792,000
in tax-free income having abackdoor Roth IRA.
We really need to understandwhat is a Roth IRA and how does
the backdoor work.
Okay, now we're going to focuson two types of individual
retirement accounts.
This has nothing to do withyour business, okay Traditional
(01:41):
IRA and Roth IRA.
If you are a business owner andyou have a 401k, a solo 401k, a
SEP IRA, simple IRA, doesn'tmatter.
If you've got some retirementaccount for the business,
phenomenal, continue using it.
You can still use the backdoorRoth IRA to grow tax-free income
.
Now let's understand what isbackdoor Roth IRA.
(02:03):
Before we understand backdoorRoth IRA, let's break it down
into two individual retirementaccounts.
We've got traditional IRA andwe've got Roth IRA.
There are some differencesbetween them and it's really,
really important to understandthem.
Traditional IRA you put moneyinto an individual retirement
account and you get a taxdeduction Because you get a tax
deduction.
Irs says when you retire,you're gonna.
(02:24):
Because you get a tax deduction, irs says when you retire,
you're going to pay us incometax on it, okay.
Roth IRA it's after tax dollars.
You don't get a tax deductionfor contributing to Roth IRA.
So when you do retire, whatevermoney was earned in that
account is completely tax-free.
So again, traditional youtraditionally put the money in,
you get a tax deduction.
(02:45):
You pay tax on it when youretire.
Rough IRA non-traditional putthe money in no tax deduction
and tax-free income when youretire.
Now to put money intotraditional IRA generally there
are no income limits, meaning tosay you can put the money into
traditional IRA anytime,regardless of how much money you
earn.
(03:05):
Now there are some limitationsif you've got money of excuse me
retirement account from yourbusiness or whatever that is.
But the point that I'm trying tomake, whether you have
retirement account or not,you're not prohibited for
putting money into traditionalIRA Whether you're going to get
a tax deduction or not.
That's a different story.
But the point is you're notprohibited to opening
(03:26):
traditional IRA account,regardless of how much money you
make and putting money intothat account With the Roth IRA.
You're actually prohibited todirectly contributing money to
Roth IRA if your income limitsexceed threshold.
So if you're a singleindividual, your income is more
than $161,000, you're prohibitedfrom putting money directly
(03:47):
into Roth IRA.
Or if you're married individualwith $243,000, you're
prohibited from putting moneydirectly into the Roth IRA.
That's why we have a backdoorRoth conversion.
That means we are prohibiteddirectly putting money into the
Roth IRA because we exceed ourincome limit, but we're not
prohibited from putting moneyinto a traditional IRA, doesn't
(04:11):
matter what the income limit is,because with traditional IRA
you can put the money in.
And then we have this amazingtax law and the code that says
you can do what's calledbackdoor Roth conversion.
From the backdoor, you can goahead and convert it to Roth IRA
because that conversion has noincome limits.
It doesn't matter how muchmoney you make and you're
(04:32):
contributing it to a Roth IRA.
We're going to talk about anexample over here, but that is
really what backdoor Roth is andthe reason why it's called
backdoor and why it worksbecause, again, you're
prohibited putting money intotraditional, but you're not
prohibited.
Excuse me, vice versa.
You're not prohibited intotraditional, but prohibited into
(04:52):
Roth.
So we put the money intotraditional and convert it to
Roth IRA.
How much can you put awayannually?
$7,000.
And if you are over the age of50, you can put away $8,000 and
do what's called a catch-upcontribution.
So these limits are for bothtraditional and Roth IRA.
Let's talk about a practicalexample how to do this, how to
(05:14):
do it in a financial institutionthat you're working with.
How it's going to example howto do this.
How to do it in a financialinstitution that you're working
with.
How it's going to work, howit's going to grow tax-free
income right after this break.
Speaker 2 (05:21):
If you have a tax preparer and you do not have a
tax advisor, the only way youcan save money on taxes is by
using proactive tax planningstrategies that only a tax
advisor can give you.
Bora's put together a free PDFfor you, the business owner
Seven tax write-offs every Scorporation business owner must
know.
In this PDF you can find seventax strategies that you can
(05:44):
start using in your business toinstantly start saving money on
taxes.
Click on the link in thedescription below for a free
download.
Speaker 1 (05:52):
All right, awesome, let's get started.
By the way, if you have notbeen using this strategy, which
is backdoor Roth IRA, up untilthis point, please definitely
speak to your tax advisor.
Be like hey, I just want tomake sure I'm doing it right.
There's no tax implications.
Even though Boris said this isgood to go, I want to confirm
with you can we do this?
Definitely implement this.
And if you've got a taxpreparer that just puts the
(06:13):
right numbers in the right boxes, you don't have a real tax
advisor.
Please do yourself a favor, doyour financials a favor.
Get yourself a tax advisor Now.
Let's go into this example righthere.
So how does this work?
You're like all right, boris,great, I want to use this
strategy.
I'm definitely over the incomethresholds.
What do I need to do next?
(06:34):
Now, what you need to do nextis open up two accounts.
You need to open a traditionalIRA and you need to open a Roth
IRA.
Now, there's a lot of financialinstitutions that let you do
that.
You can open both.
Some financial institutionscharge you money, some of them
don't.
It's up to you who you choose,but all financial institutions
(06:55):
have an option in their app, onthe phone or on the online
platform to open both and do aRoth conversion.
It's a very famous thing.
This is not like something thatwas just created yesterday.
Okay, open traditional account.
Let's say you are within theincome limits or over the income
limits, excuse me.
Go ahead and put the money intotraditional IRA and then
(07:16):
convert that traditional IRA, doa Roth IRA conversion and
transfer it $7,000 to Roth.
You might say, boris, am I goingto pay tax on that conversion?
Because a lot of people ask methat, Boris, aren't I going to
pay tax?
The answer is no Because, let'ssay, right now, in a year 2025,
.
The answer is no because, let'ssay, right now, in a year 2025,
(07:40):
you put $7,000 in, you don'tget a tax deduction.
Okay, because you didn't evenfile your taxes yet and you're
converting it right away.
So you never paid taxes on it,so you're not going to pay taxes
on the conversion.
You're doing it with the sameyear.
Now, in the situations where youare going to pay tax, is that,
let's say, you had traditionalIRA all these years.
You have $100,000 in there andyou're like you know what?
I want to have a tax-freeincome in the future from this
(08:01):
$100,000.
I am going to convert what Ialready had before this year
into a Roth IRA.
On that conversion you're goingto pay tax.
Why?
Because when you were puttingthe money into the traditional
IRA originally in the past, youwere getting a tax deduction.
So that's why you would pay taxon that.
But in our scenario we're doingit for the same tax year $7,000
(08:25):
to traditional backdoor Rothconversion to a Roth IRA.
Now if we go through an example,let's say you do this for 30
years.
So 30 year old business owner,you do it for the next 30 years
until your age of 60, $7,000 foryourself Okay, and $7,000 for
your spouse if your spouse worksin the business Okay.
(08:45):
So we're just going to use oneindividual, in this case 30
years, $7,000 a year.
Assume 8% earnings annually.
Now that has been like theaverage market rate, I think
right, like on a veryconservative side.
So we're just going to useeight percent compounded
annually in 30 years it's goingto turn into 792 000.
(09:07):
Now, whether you are anon-business owner or business
owner, if you do backdoor, don'tdo backdoor roth, but just
contributing money into roth irafor the next 30 years, seven
thousand dollars a year.
It's going to turn at 8%,$792,000.
Out of the 792,.
Only 210,000 was your originalcontribution from your own money
(09:29):
and $582,000 was earnedtax-free.
Now if you do this for yourself$582,000 in tax-free plus the
210, of course then you can dothis for your spouse.
That's another $792,000.
You can do it also for yourchildren that's another tax-free
income.
You can absolutely use Roth IRAto your advantage.
(09:53):
Make sure that you're speakingto your tax advisor, looking at
wide variety of options puttingmoney away into retirement,
getting a tax deduction but atthe same time, having a
retirement account for which youwill not pay taxes on when the
money that you pull out atretirement.
Definitely speak to your taxadvisor.
Thank you so much and I hopethis was helpful.
Speaker 2 (10:14):
That's it for today's episode.
Be sure to check out thedescription below for some free
tax reduction resources thatBoris put together for you.
If you're ready to work with atax advisor on your tax planning
, be sure to schedule your callby heading over to
wwwtaxplanningcallcom.
That's wwwtaxplanningcallcom.
And be sure to subscribe to ourpodcast to be notified when the
(10:36):
next strategy is released.
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