A Guide to the Backdoor Roth IRA, and Heirs Squandering Inheritances

Motley Fool Hidden Gems Investing

The Motley Fool

Business, Investing

4.3 • 3.1K Ratings

🗓️ 25 April 2026

⏱️ 16 minutes

🔗️ Recording | iTunes | RSS

🧾️ Download transcript

Summary

People look forward to retirement as a time of fewer obligations, but it can also be a time of lower taxes, especially if you have money in Roth retirement accounts. However, if you earn too much money, you can’t contribute directly to a Roth IRA. But you may still have an option. Host Robert Brokamp lays out the five steps to contributing to a backdoor Roth IRA, and highlights a landmine to avoid. Also in this episode:-The stock market posted one of its best 10-day returns – what does history say happens next?-A new study finds that heirs spend inheritances remarkably quickly. What are ways to leave an inheritance that won’t be squandered?-The input costs for food companies almost doubled in March, and prices may rise even more over the next three to six months.-Happy 50th birthday to Vanguard’s S&P 500 index fund, the first index fund available to individual investors. Host: Robert BrokampEngineer: Bart Shannon Disclosure: Advertisements are sponsored content and provided for informational purposes only. The Motley Fool and its affiliates (collectively, “TMF”) do not endorse, recommend, or verify the accuracy or completeness of the statements made within advertisements. TMF is not involved in the offer, sale, or solicitation of any securities advertised herein and makes no representations regarding the suitability, or risks associated with any investment opportunity presented. Investors should conduct their own due diligence and consult with legal, tax, and financial advisors before making any investment decisions. TMF assumes no responsibility for any losses or damages arising from this advertisement.We’re committed to transparency: All personal opinions in advertisements from Fools are their own. The product advertised in this episode was loaned to TMF and was returned after a test period or the product advertised in this episode was purchased by TMF. Advertiser has paid for the sponsorship of this episode.Learn more about your ad choices. Visit ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices

Transcript

Click on a timestamp to play from that location

0:00.0	Getting money in a Roth IRA through the backdoor and the amazing inheritance disappearing act.
0:10.7	That and more on this Saturday personal finance edition of Motleyful Money.
0:30.1	I'm Robert Broke, but this week I'm going to lay out the five steps to contributing to a backdoor Roth IRA and highlight a couple of potential landmines you definitely want to avoid.
0:38.7	But first, let's look at some headlines from this past week or so. You know, the stock market has shaken off the concerns of war and rising oil prices and is now near all-time highs.
0:43.2	In fact, the S&P 500 recently posted a 9.8% 10-day rally.
0:48.7	According to the Carson Group, this was the 20th best 10-day return for the index since 1950.
0:51.7	What happened a year after the other 19?
0:55.0	Well, the market earned a positive return in 16 of those instances, with the three instances of stocks being down a year later, all occurring during
0:59.9	the dot-com crash of the early 2000s. The median 12-month return after all of those 19, essentially
1:05.7	double-digit 10-day rallies, was 20.8%. In the Facts versus Feelings podcast, the Carson Group's Ryan Dietrich, a previous
1:12.8	guest on our show, pointed out that the market hitting new highs in April has nearly the same
1:17.9	frequency as those exceptional rallies, it having happened 19 times. And in all but one of those
1:23.1	instances, the market ended the year in positive territory. As Ryan pointed out, a lot of this is just
1:28.4	fun with numbers and not necessarily information you would use to make investing decisions,
1:32.9	but the reasons underpinning the rally, namely growing corporate earnings and high profit margins,
1:37.5	are good signs. Next up, what do people do when they inherit money? Apparently, a lot of people
1:43.1	spend it. That's the conclusion of a
1:45.1	recent study from Corey Thompson of the University of Alabama and Russell James of Texas Tech
1:49.9	University. They looked at data from 2010 to 2018 to investigate how people handled
1:55.0	inheritances compared to other infalls like gifts, lawsuit rewards, insurance settlements,
2:00.5	things like that. The headline finding
2:02.7	is that inheritances get burned through remarkably fast. Each inherited dollar increased next wave
	...

Please login to see the full transcript.

Previous episode | Next episode

Disclaimer: The podcast and artwork embedded on this page are from The Motley Fool, and are the property of its owner and not affiliated with or endorsed by Tapesearch.

Generated transcripts are the property of The Motley Fool and are distributed freely under the Fair Use doctrine. Transcripts generated by Tapesearch are not guaranteed to be accurate.