You can do it, and it would be wise to do in residency when it’s cheaper to do so, but not so wise as an attending. This year I can fully contribute to a Traditional IRA for 2018, which I will do, and then I will immediately roll it over to my employer’s 401K. Is there a step left out? Love the screen shots. NerdWallet strives to keep its information accurate and up to date. Thanks PoF for this helpful post! Im in the same situation with $20. Both conversions took place in 2018, and there’s nothing wrong with that. 1. When i converted my $5500 2018 contribution it showed $5500 under 2018 TIRA contributions, with $5500 (plus some interest) under 2019 ROTH rollover (although this was a conversion not rollover I thought…). Fresh out of residency and in my new job with no 401k option until I’ve been there a year. This generally happens only if you're among the highest paid workers at your company. What would be the implications of leaving it and converting it with my 2021 backdoor Roth? Now what I am to understand is that because these contributions were using after tax money (since my income phased out the deductions available) I have established a basis (which I assume is total amount I have from all the Form 8606s in past. If the latter, are there any restrictions on converting any earnings I receive on top of the $5,500? 1. I have been referencing your article year after year for the last three years. It’s 12/31/19 right now and I can’t convert by 1/1/2020. If the fund options aren’t great, is it best to just not do the Backdoor IRA? No big deal. Note that in the lower left, you’re told that you have $6,000 in funds available to trade. The senior executives are the ones who tend to take advantage of the mega back door Roth. I doubt it will look much different than last year’s. With the loss of re-characterization in the new tax law, I see little benefit to a Roth. My spouse’s conversion worked just as you described for a brokerage account. I mistakenly over-converted from my SEP IRA into my Roth IRA (twice, in fact *facepalm*). Another option for employees may be to roll the IRA into an employer’s 401(k) plan. My question is, can I start an SEP IRA if I already have money sitting in a Roth IRA. It tends to happen more often to people who are most interested in saving for Roth as they commonly have an … So it is definitely worth doing. Last year I rolled over my trad IRA to my employer 401k, then did the back door. Disregard. Maybe it makes their budgeting easier, I don’t know. As in, does it become characterized as a Roth conversion and will I be able to access/withdraw tax-free/penalty-free for this conversion after the 5 year waiting period ? I just started this process and have noticed that when I get to step 2, when I am about to make the conversion, the option for “retirement contributions and distributions” exists as an option in the task bar of my preexisting Roth IRA, but the option in the task bar of my new traditional IRA in it’s place already says “convert to roth IRA.” Did they just cut out some of the steps? Only dumb people. – Just take the tax hit this year? Exactly the reason that I didn’t roll my 401(k) into an IRA was because I wanted to keep the IRA space open in order to give myself the flexibility to do a backdoor Roth since we anticipate our household to earn above the income limit for contributing to a Roth (turns out dentists do pretty well – lawyers…eh). Rollover 8 of 12k to my employer 401k, leaving the 4k on which I already paid taxes in the IRA. B, My spouse does not work and my GAI is 175000 . Question ACA subsidies: I used the Finance Buff’s guide to enter 1099R but when it comes to what is your end of yr balance, he has 0 but I had 5555. Choose convert to Roth IRA, but I can’t directly convert into VTI at this step for some reason, can someone please confirm if this is because it’s a brokerage account? Two questions: if my husband has an inherited ira does that complicate matters, Second question: Are we allowed to do the backdoor roth for the same amount 6500 my Rollover IRA) in order to take advantage of the backdoor Roth. But this only was available AFTER I submitted 2019. Does this make sense? Hopefully my questions make sense. Now that you understand more about the nuts and bolts of the account, let’s take a look at some of the top advantages of using a mega backdoor Roth. I thought that was a good sign. PoF you mentioned that you converted the next day. I was worried that when I contibute $6000 to 2019 TIRA then convert to Roth it would hard stop me for going over the 2019 Roth contribution limit. After reading about the backdoor Roth, you state that I cannot have a tax-deferred IRA in my name in order to do this. I heard you can do Backdoor Roth conversions for the previous tax year. The funds should “settle” tomorrow, so I’ll try again then. There was a thread on Bogleheads about this. I didn’t have to wait after doing that, either. Is this true? View companies that provide Mega Backdoor Roth IRA as a benefit to their employees. What happened is I contributed to the spousal IRA but after tax filing the contributions were classified as non-deductible because of income limits per the IRS code. If you have an IRA that is funded solely with non deductible contributions can you convert it entirely to a ROTH IRA, then you would have to pay taxes only on the capital gains, right? In the next step, we’ll invest that money. I make between 120 – 125k annually while wifey makes around 58k. If you have no other IRA accounts and since the money is already taxed I would just Roth convert the IRA in it’s entirety to the Roth. it doesn’t have a tremendous balance, only about 30K. When I click on the links, it shows the 6k went over for 2019. My wife does not work. Thank you for such a great post! Because my Simple IRA is my tax deferred 401K equivalent, are you just saying that if I do a Roth conversion I am going to have to pay taxe each year on the $12K that I am converting via the backdoor Roth (married filing jointly) or the $12K + the $13,500, max of the tax deferred Simple IRA as well? Click OK to be redirected to the Roth Brokerage IRA conversion help page.”. Can perform a backdoor from the IRA to the Roth without tax consequences since there have been no contributions? Can you please clarify how a correct form 1099-R should look like? It’s good to have this to look back on each year. Here’s why: With a regular 401(k), you get an upfront tax break — your taxable income is reduced in the year you make your contributions, and you defer taxes on your investment earnings until you retire. I have an IRA (rolled over from prior employer’s 401K,and an old SEP iRA- it is in traditional ira now) of about 200K. I placed my 6K in both my account and Wife’s yesterday and went to convert today, using the “convert to Roth IRA” button on balances and holdings. Hi, little tinder, Thanks Wilbur. Since I am still in a lower tax bracket (making ~$58K,) should I take advantage of the Roth that is offered through my employer since these are probably the last few years I’ll be in a lower tax bracket? Advanced Topics in Mega Backdoor Roth. Mega Back Door Roth. (I’m still waiting for the funds in the traditional to become available, so am hoping that this will work out next week). You can do it either way. Since then, since vanguard never stopped me from directly contributing to the Roth (and my accountant raised no objection) I have been funding it directly without converting from traditional ira. Her work has appeared in The Wall Street Journal and MarketWatch. Don’t forget to view the Backdoor Roth FAQ! Thoughts? I will break this down into two distinct tutorials: one for a brokerage IRA account (all newer accounts) and a second for older mutual fund accounts that have not transitioned. I regret opening my solo 401 account at Vanguard which does not allow me to roll my SEP-IRA into the 401 K. If you are thinking of opening up an solo 401K account, don’t do it at Vanguard. I cant seem to find one for 2017 or 2018. yes, same issue – cannot find the form 8606 for 2017… following … do they wait until close to when taxes are due to publish the 2017 8606? I have an old SEP IRA that I am working on rolling over to a solo 401K. I knew that Roth money got a bank interest $ 0.01 in my so... 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