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Lesson · Retirement · investing

Pay the tax once. Then never again.

A Roth IRA grows tax-free and comes out tax-free in retirement — and self-directed, it can hold real estate and private deals, not just funds.

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$24,000
TAX ON A $100,000 CONVERSION AT THE 24% BRACKET

THE CORE TRADE

SEED TAX OR HARVEST TAX

Deduction todayNo deduction today
Growth tax-deferredGrowth tax-free
Withdrawals taxedQualified: 0% tax
IRS stays a partnerIRS is done

Key points

KNOW YOUR NUMBERS

✓
2025: $7,000
✓
Age 50+: add $1,000
✓
2026: $7,500
✓
Age 50+: add $1,100
✓
Deadline: April 15
✓
Earned income required

How it works

THE ROTH LAYER CAKE

1
CONTRIBUTIONS COME OUT FIRSTAny time, 0% tax, 0% penalty
2
CONVERSIONS COME OUT NEXTEach has its own 5-year clock
3
EARNINGS COME OUT LASTNeed age 59 1/2 and 5 years

How it works

THE BACKDOOR CONTRIBUTION

1
CHECK YOUR MAGI2025 phase-out starts $150K
2
FUND A TRADITIONAL IRANondeductible contribution
3
CONVERT TO ROTHReport it on Form 8606
4
CHECK THE PRO-RATA RULEOther pre-tax IRAs count

BEYOND YOUR LIFETIME

WHO INHERITS TAX-FREE

Treat it as their own10-year payout rule
Keeps growing tax-freeGrows tax-free 10 years
No lifetime RMDsDistributions 0% tax

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The The Roth IRA field guide — one page

The strategy, the checklist, the key numbers, and links to the actual tax code. Print it, take it to your CPA. Free, no strings.

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Field guide · PDF

The Roth IRA

Cliff notes + checklist + the law

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The law behind it

Primary sources

Verify against the source before you rely on it. This is education, not legal or tax advice.

26 U.S.C. Sec. 408A — Roth IRAs — the tax-free-growth and qualified-distribution rules.law.cornell.edu/uscode/text/26/408A
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