Charles Schwab Backdoor Roth IRA Step By Step (Updated for 2024!)

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It’s the start of 2024 — the perfect time to contribute to a Roth IRA! If you already know the benefits of Roth IRAs and are aware of the contribution limits, feel free to skip the Overview section and go directly to the Steps.

Overview

The main advantage of a Roth IRA is that your money grows tax free, and when you withdraw in retirement, you pay no taxes. For example, consider a Roth IRA that starts with $7,000 and grows to $7,500. During retirement, you can withdraw the gain of $500 tax-free. Now, consider a non-IRA account like Cash App that starts with $7,000 and grows to $7,500. You will pay taxes when you withdraw the gain of $500.

These tax-free gains sound great, but the IRS only allows you to contribute a certain amount each year. It is important to contribute as much as you can each year, or you lose your opportunity for that year. For example, I can’t make a Roth IRA 2022 contribution in 2024.

In 2024, you can contribute $7,000 ($8,000 if you’re age 50 or older).

If you earn over a certain amount, you will not be able to contribute to a Roth IRA.

Your tax filing status and Modified Adjusted Gross Income (MAGI) determine the amount you can contribute each year. In 2024, these contributions…