They sound similar, but there are many differences between the two strategies. If you’re a high earner, one of them might be worth pursuing.
A backdoor Roth IRA is fairly straightforward. If you make too much to contribute to a Roth IRA, you contribute to a traditional IRA instead. While you can only contribute up to $6,500 to an IRA in 2023 , there is no specific conversion limit.
The reason for the $43,500 limit is this plus either $22,500 or $30,000 puts you at the maximum total contribution for the year. You must deduct that from the $43,500 if your employer offers matching contributions. —Tax benefits: Money in a Roth IRA can be withdrawn tax-free in retirement, assuming the account has been open for five years.
—Five-year rule: Money must generally sit in a Roth IRA for at least five years before you can withdraw it penalty- and tax-free.—Larger contributions: This strategy lets you contribute much more than normal into a Roth IRA .
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