Reply to Please explain a Back Door Roth?

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Reply to "Please explain a Back Door Roth?"

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[quote=Anonymous][quote=Anonymous]Not OP, but I don't quite understand the rationale for going through the effort. Why bother?

With a traditional IRA, the max contribution is just $5500/year. So, while we would be benefiting from the earnings growing tax free in the Roth, we can't put very much money in to it. Since the back door Roth only applies for those making over about $200k, you can only stuff a tiny portion of your assets in it.

The tax benefit just seems kind of trivial compared to just holding on an asset and passing it on with a stepped up basis. [/quote]

See the second table in this link. It assumes an initial contribution of $10,000. When withdrawn at the end of 30 years, if you had put the money in Roth it would be 72K. If in a non-deductible traditional IRA (non-deductible being the only option for high earners) then 54K. And that is assuming you only contributed 10K at the beginning.

https://www.bogleheads.org/wiki/Non-deductible_traditional_IRA

So, maybe it's "trivial" if you think tens of thousands of dollars are trivial...and if you think a little paperwork is "effort".
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