It may look different in a brokerage account versus a mutual fund account, which is what I have. Can anyone confirm? This post is old but I just happen to see it, and I post my question just in case you would respond. I didn’t have to wait after doing that, either. The problem with that is the plan only offers high cost funds (all over 1%). I am planning on doing the back door roth for the first time. Advice/thoughts? Quick Question. Is the non taxable distribution per pro rata rules only the 73/198 (~37%)? No dice. If your 403(b) allows rollovers, that would be a great way to “hide” that money so you can take full advantage of the backdoor Roth option. I plan to move this to a traditional IRA account and then convert all of this to a Roth IRA using the backdoor Roth approach. Thanks for posting this! If you were going to donate to a DAF anyway, capital gains can be “gifted” to a charity and you get the full deduction. You will receive a 1099-R in January 2019 to report on your 2018 income tax return and the $1,000 will be ordinary taxable income. Not all plans accept rollovers, but mine does, and this was the route I chose with my SEP-IRA a few years ago. Get a 1% yield bump on your first investment in commercial real estate, Earn easy 1099 income with quick surveys for healthcare professionals with InCrowd. I’ll give you a spreadsheet full of useful and fun (yes, I said spreadsheet and fun in the same sentence) calculators, and you’ll know when new posts are published. You must have at least $12,000 of earned income between the two of you (or $13,000 or $14,000 if one or both of you is at least 50 years old), but all of the income can come from one person. If there’s any kind of small business (and it can be very small — like walking dogs on Rover or answering surveys) that she could start, she could open a solo 401(k) and roll the IRA into it. – Is there a way to just ‘undo’ the backdoor Roth? Can you please clarify if this means we cannot use the backdoor approach any longer? Can I open a new Traditional IRA and second Roth IRA at Vanguard and contribute $5500 for 2017 and $5500 for 2018, then transfer the entire $11k to the newly opened Roth at Vanguard? 1. The IRS has instructions and a worksheet that may help. You can also subscribe without commenting. I’ll have to pay the income tax for the converted amount for 2017. One question that occurred to me yesterday was: I do a mega backdoor Roth for Mr. BITA because his 401k plan allows for it (mine does not) and regular old backdoors for me. Thank you good sir – have been reading more about this since your post a few weeks back. I would just leave it. 4. Thanks so much for the tutorial! My understanding with the Roth conversion ladder is that you can only convert the maximum Roth limit each year so if I wait to contribute until I am closer to early retirement, I will only be moving roughly $6k or whatever the max is which will not do much for me after the 5-year waiting period. Hi PoF! I doubt it will look much different than last year’s. I was wondering if my plan is reasonable. Internal Revenue Service (IRS). 1). If you’re going to do the backdoor Roth, you need a Roth IRA, anyway. I just posted about the same thing without seeing your post first, so i decided to delete my post and piggyback onto your post. What do I need to do exactly with my SEP IRA before opening the traditional IRA now and employer 401k in October? My husband is under the impression that you can over contribute to a Roth via the backdoor process. Thanks! My tax pro said backdoor roths are not allowedgoing forward into 2018 due to new tax law. Andrea Coombes November 24, 2020 Many or … My question is, can I start an SEP IRA if I already have money sitting in a Roth IRA. As I’ve always done, I convert as soon as Vanguard will let me. If you get laid off before grossing that amount and then not work for the rest of the year, you have made an excess contribution and our subject to a penalty on the excess. would hate for him or anyone else to mess up their taxes by reporting the conversion for the wrong year. In that case, if you rollover to an IRA, it will remain tax-deferred and the pro-rate rule would apply. If you had an IRA with tax-deferred money in it on 12/31/17, you cannot do the Backdoor Roth for 2017 without being subject to tax due to the pro rata rule. The elimination of recharacterizations has nothing to do with the Backdoor Roth. Tax-deferred money is taxed when withdrawn from a tax-deferred IRA (or 401(k), 457(b), etc…. Roth money is not taxed when you withdraw it, but it is post-tax money to begin with. Won’t foul up the backdoor Roth in any way. I chose E*trade due to its flexibility and access to great funds including many Vanguard and Schwab funds. If married, they do it for their spouse too. At $140,000, they can’t contribute at all. Whats the best way to use backdoor in this scenario if at all there is a way to do so. What’s holding you back? It may be too late in the calendar year to roll it over to you 401(k), so your best bet may be a Roth conversion at Fidelity, and you’ll just pay the tax on the amount converted. I would ask your CPA (or a CPA) before doing anything further. My husband does NOT have a 401k, and he does not have a ‘side-job’ that would allow him to open a 401k. I have no idea why Roth is discouraged for high-income people. For physicians like me who lack the aptitude to understand these things, thank you for simplifying complicated issues. I’m glad you were able to find the error. Great article. For simplicity, I only have one traditional IRA that I use to hold money for a day, and one Roth IRA. Very helpful step by step article! With some hard work, I have been able to pay down student loan debt, maximize retirement savings in a solo 401k, max funding HSA, etc… Now this year, I finally have gotten to a point where I could contribute to a backdoor Roth IRA for both myself and my wife. Roth IRA Limits. It remains a theoretical possibility that the IRS could have a problem with it, but I’m not aware of anyone getting in trouble for it, and this is a well-known “loophole” being employed by hundreds of thousands if not millions of taxpayers annually. The Marginal Value of the Backdoor Roth. 1. Thank you for such an informative post. Wasn’t sure if I needed to empty out all my IRAs, leave empty through Dec 31st, 2018, and do 2018 Backdoor Roth in Jan 2019. I was contemplating whether to either roll this money into my Vanguard IRA and then move it to do my backdoor Roth for 2020 (I already did the backdoor Roth for 2019) vs. rolling the old 401K into my current employer based 401K I have with Fidelity. I would like to make a spousal IRA for her. Sorry if this is a dumb question.

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