By Andy Ives, CFP®, AIF®
IRA Analyst
QUESTION:
When someone under age 59½ uses the “backdoor” method of making Roth IRA contributions, does the 10% penalty apply to subsequent withdrawals if the IRA contribution was non-deductible?
Thank you,
John
ANSWER:
John,
The “backdoor Roth” contribution method involves making a non-deductible contribution to a traditional IRA, and then converting those dollars to a Roth IRA. Backdoor Roth IRA contributions are necessary for anyone with income that exceeds the annual Roth IRA contribution phase-out ranges. If the non-deductible dollars are then withdrawn from the Roth IRA after the conversion, there is no 10% early withdrawal penalty on those specific funds, regardless of a person’s age. However, any earnings on the non-deductible dollars would be subject to the penalty if they are received before the Roth IRA owner turns age 59½ (assuming no exception exists).
QUESTION:
Hello,
I am looking for some direction on how to title a beneficiary IRA. My mother passed away in March of this year at age 94, and my sister and I are 50/50 beneficiaries. The custodian wants to title the account as: “John R. Doe as beneficiary of Jane C. Doe IRA” (implying that Jane has died, rather than explicitly stating the fact). If I recall, the title should include “for the benefit of” and be something like: “Jane C. Doe deceased (3/28/2026) FBO John R. Doe, Beneficiary.” Please provide guidance on the proper title content and format.
Thank you and keep up the great work!
Jim
ANSWER:
Jim,
Sorry for the loss of your mother. As for the “proper” titling of an inherited IRA, there is no universally required method or set format. The deceased IRA owner’s name must remain on the account, and it must be clear that it is an inherited IRA. This is typically accomplished by using the words “beneficiary,” “beneficiary IRA” or “inherited IRA.” Both examples you provided are acceptable, although we prefer a title similar to what you suggested: “Jane C. Doe IRA (deceased 3/28/2026) F/B/O John R. Doe, Beneficiary.”
If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.
https://irahelp.com/backdoor-roth-iras-and-inherited-iras-todays-slott-report-mailbag/
