First off I get that not everything the government does, especially when it comes to taxes makes sense.
1. Over Roth IRA Contribution limits aka Backdoor method : So I can contribute to traditional IRA and can then convert it to the Roth IRA? How does this work tax wise? The money I put into the traditional IRA would already be taxed income, I then claim the tax deduction during my return but then when I convert to the Roth I pay the taxes back? If so does this all happen in the same calendar year?
2. Withdrawing from Roth IRA before 59 1/2 without 10% penalty : I read the below article. So essentially I'm doing the above process but somehow if I leave this alone for 5 years I magically don't have to pay the penalty? Why? Does this apply to any money in a Roth IRA that has been in for 5 years or only these conversions? Can you really take your 401K, move to traditional ira, then convert to roth ira paying current rate taxes, and then access this money in 5 years without paying taxes or the 10% penalty? Seems too good to be true...
https://www.moneyunder30.com/roth-ira-conversion-ladder
TIA
1. Over Roth IRA Contribution limits aka Backdoor method : So I can contribute to traditional IRA and can then convert it to the Roth IRA? How does this work tax wise? The money I put into the traditional IRA would already be taxed income, I then claim the tax deduction during my return but then when I convert to the Roth I pay the taxes back? If so does this all happen in the same calendar year?
2. Withdrawing from Roth IRA before 59 1/2 without 10% penalty : I read the below article. So essentially I'm doing the above process but somehow if I leave this alone for 5 years I magically don't have to pay the penalty? Why? Does this apply to any money in a Roth IRA that has been in for 5 years or only these conversions? Can you really take your 401K, move to traditional ira, then convert to roth ira paying current rate taxes, and then access this money in 5 years without paying taxes or the 10% penalty? Seems too good to be true...
https://www.moneyunder30.com/roth-ira-conversion-ladder
TIA