Pitfall to Back-Door IRAs

If you are saving for retirement, many individuals favor Roth IRAs over traditional IRAs because the former allows for both accumulation and post-retirement distributions to be tax-free.  In comparison, contributions to traditional IRAs may be deductible, earnings are tax-deferred and distributions are generally taxable.  Anyone who is under age 70.5 and who has compensation can make a contribution to a traditional IRA (although the deduction may be limited). (more…)