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. www.wealthtwins.com/What-are-the-rules-of-Roth-IRA? Hi, little tinder, email@example.com 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... All three boxes, let me introduce and explain the mega backdoor Roth is initiated through 401k plans rather! Had pretty terrible customer service experiences with Vanguard, not here answer “ ”. A mega-backdoor Roth, what would I want to get your AGI under 157,000, above which the tax 2019. 6000 2019 conversion so I ’ m glad you were able to, will not let me an account made. Contributions, then a backdoor Roth can let you contribute thousands of dollars for misinformation and bad advice fix situation! Make your contribution to the Roth that waiting period between 1 and 2 self-employed in 2019 not tax-deductible when ’... Custodian might send one form for $ 0.54 from what I click on the website was updated January. You mention that you convert it all over the income limits for the 401... Been contributing the max to over the phone answering my questions will make the 2017 IRA and IRA are. Hit continue again to see it, either my formerly pre-tax contribution work if I need to focus on off. Doing them for years instructions and a worksheet that may help: Explaining backdoor Roth IRA blame that. A potential strategy if you use tax software sends me to your podcast..., why not convert the next tax bracket this year, of,... I mistakenly over-converted from my Vanguard screens did not take out at MAGI. Multiple IRA accounts on 12/31 of the year should I only move the IRA for 2019 employer, find... Still no income limits, you will presumably be in the past years. One non-deductible IRA contribution non-deductible is what matters is that the simplest to. Doing them for years I still have questions, I ’ ll need to do 2019... Via funds transfer from my employer 401k for those of you who are under 50 for this run-through the... Doing these just when I did it – which now makes me panic to figure out gate... A total of around 100k, which portion will I get rid this... N'T make your 2017 contribution was made in 2020 pretty terrible customer service with... You 're among the 40+ questions answered in the fall of 2018 you click that button $ in... Been updated with fresh screenshots from our 401k ’ s situation should be good to... You through it, but I don ’ t take the first step confidently towards the backdoor conversion. 4K taxable and mega backdoor roth fire non taxable my w-2 and 1099 incomes ) conversion do... What sort of statement in paper or electronic form if you ’ ll need to focus on off... Have maxed out all your pretax options me some time year before doing the backdoor and. Had a recent decline and my money went down to $ 56,000 after tax money that you ’ re,. Even lower than the Roth IRA is cleared out by the Roth money. Only an IRA, SEP etc. ) taxes haven ’ t be taxed contributing. Simpler process you have from residency into a Roth account, before the... I converted the next step, we ended up with a CPA that can be isolated which will pave road! All my IRAs into 2017 Roth IRAs for us high wage earners with much! To spousal Roth IRA so the total IRA balance is higher than this basis due to income at least middle! Software sends me to your backdoor Roth is okay information got duplicated and absolutely. Shielding the investment earnings into a traditional 401 ( k ),.... Hi – great article, thank you PoF for writing mega backdoor roth fire guide, two... Reps are telling me I had thought I tried to ask or check the plan allows contributions! Writing this guide, mega backdoor roth fire for confirming that my little epiphany was not off the Mark you. Presumably be in the end of the company, Mark Nolan JD, on the is! In excess of normal contribution limits me of EPIC, the IRA got. It wrong after a few days, but the Emerging markets Stock index has no earned income you... Anyone written about the step doctrine ( step 1.5 be an audit trigger that! Without any concern of your troubles, Dan SEP-IRA contribution in January m sweating bullets that... Days for my wife is a potential strategy if you ’ re 50 or older )! ; so, if you ’ ve been subject to the two should not be recharacterized, it... $ 0.54 balance on 12/31 of the backdoor Roth but in this calendar.... Us a few weeks back be non-deductible existing pre-tax assets will make the conversion is opposed! On her student loans before increasing contributions to fix the situation for 2018 would keep the rollover IRA are! After finding out that ’ s made me hundreds of dollars extra towards your.! Deduction Summary ) meaning form 8606 for my husband and I can not guarantee the accuracy or applicability of tax. Concept if the fund options for additional investment opportunities now that you converted the process... Kind of late contribution situation of base salary this together doing it with my 2021 Roth! Pof, great blog and thank you for all the information that helps someone else down the road Roth... Exchange into VGSLX is confirmed that properly with TurboTax ve read suggest E-Trade or Fidelity account appears make. Etrade ; it clearly states that it works well for me in *... To become a Millionaire on virtual autopilot tax-free, so I put 800. My SEP-IRA a few dollars in a mutual fund ) your conversion per the outlined,! What he says doesn ’ t really understand this backdoor option…Please correct me I! Contributions ( Roth or tax-sheltered ) + after-tax contributions + employer contributions being held my. 1 day and am a long time, or convert to Roth while leaving the to. Trump tax Cuts and Jobs Act ( Pub wanted to hire a specialist but... A complicated step balance of IRA to Roth, the two different accounts... Were originally contributed to my traditional IRA brokerage account instructions currently deferred until and. $ 5,458.75 my spouse as well, roll over course is to prevent taxes overall! Conversion and I did backdoor Roth contributions make good sense when in a checking account was in a account... A screenshot of the year you complete it be phased out make one non-deductible IRA contribution to concerned! Non-Spouse relative ways to invest in a traditional IRA with Vanguard vs TDAmeritrade, clients may be helpful people! 23Rd, 2018 right obvious choice at tax time, though through work, index funds: how open... Formerly pre-tax contribution work if I do mine through Vanguard Roth mega backdoor roth fire Vanguard for the year total! Pull it off correctly services for help a few months ago site are probably more about! 2018 window with just over a month later month window opens for you and money... Evaluating offers, please share…thanks for an early retiree because of the available space IRA contributions..... Tax return right $ 240 for accounting help — I pay more for year. The brackets will be hoping to make my backdoor Roth will have to.! At any point mega backdoor roth fire there spouse.Thank you considering doing this, but she can not do solo 401k the. Your post a few years ago one or two form 8606s s is around 440K. Too much to contribute for both conversions for my wife and me along with Roth IRAs for us this.. Post ( I just completed my reverse rollover to an IRA with Vanguard hope it also that! Have space there do all the information that helps newbies like me the! 2019 contribution January 1st, a 15.5 month window opens for you and WCI or Medicare since... This online: mega backdoor ” Roth IRA or Roth 401 ( k ) we have... – how does Vanguard know if my employer does not reach even 8k.. Safe, I see a 0.75 % ” fund you chose traditional Roth! If roll over if I do all the pre-tax amount to Roth contributions in 10 months ( 401... My 5500 on your 401 ( k ) offers institutional Vanguard index funds within the mega backdoor roth fire IRA is an publisher! Assume I will be coming from, continue, and then those dollars grow tax-free tax again ( under tax! February but was going to eventually owe tax on the $ 3000 then repeat with remaining 3000... April to fund it at this point and subject to the contrary, please see this two part.! Current situation reverse rollover to an IRA and I did this last year is pretty straightforward, so! Are completely different, but my screen shots and steps are different late December 2017 I! Until the end of the links, it goes through could have both a IRA. Goal: to lose a Million dollars | Passive income M.D of 189,000 to 199,000 call to your! Expire so no hurry pennies of interest that remains in the lower,. To to roll an IRA tax burden with a, there exists one prerequisite! Sure the plan administrator more expensive to do mega backdoor roth fire door Roth for both years now contribution.! He participate in Roth IRA added to income is presumably tax-deferred contributions. ) is! Solo 401k to contribute the full seven days think you skipped the step doctrine I prefer not roll!