Understand the backdoor Roth IRA and its tax pitfalls: test your skills
A two-step route to a Roth IRA for people above the income limit — with a pro-rata rule that trips many up. Answer each question to see the explanation; your score appears at the end.
This test checks that you can
- Describe the two backdoor steps
- Explain the pro-rata rule
- Know when to get professional help
- Practice
1. The backdoor Roth is mainly used by…
- Practice
2. The pro-rata rule looks at…
- Practice
3. Which IRS form tracks non-deductible contributions?
- Key idea
4. Which statement best explains "Two steps, one goal"?
- Key idea
5. Which statement best explains "All IRAs count together"?
- Key idea
6. Which statement best explains "Form 8606 matters"?
- Action plan
7. In the action plan, which step comes first?
- Mistake to avoid
8. Which of these is a mistake this lesson warns against?
- Mistake to avoid
9. Which of these is a mistake this lesson warns against?
You have $20,000 pre-tax IRA money and add $5,000 after-tax. You convert $5,000. How much is taxable?
Show the answer
$4,000
After-tax share: $5,000 ÷ $25,000 = 20%. Taxable: 80% × $5,000 = $4,000.
Add up all your pre-tax traditional, SEP and SIMPLE IRA balances.
More tests in this bootcamp
- Understand your 401(k) and employer match
- Open the idea of an IRA: account first, investments inside
- Compare Roth and Traditional IRAs through the tax timing
- Understand the backdoor Roth IRA and its tax pitfalls
- Understand an HSA’s tax benefits and receipt records
- Explore how claiming age changes Social Security benefits
- Use the 4% rule as a starting point, with its limits
- Plan for required minimum distributions
- Check the costs and commitments of early retirement withdrawals
- Final exam: Retirement accounts