Backdoor Roth IRA

[Anonymous]

I've read a lot about people doing Backdoor Roth IRAs. But I have a logistical question:

Do you keep opening up a new IRA every year? Then converting it at the appropriate time?

For instance, say I want to make my 2016 contribution - so I open up a regular IRA. Then convert it into a Roth IRA. Then next year, do I do the same thing again?: Open up a new IRA, then convert that one? Or do I somehow roll over that regular IRA $$ to my existing backdoor Roth?

And what's the best place to do this? I have a TD Ameritrade account. Can I do it with them?

[Anonymous]

And if you're already contributing to a workplace 401K are there restrictions to contributing to a Backdoor Roth IRA?

[Anonymous]

Anonymous wrote:I've read a lot about people doing Backdoor Roth IRAs. But I have a logistical question:

Do you keep opening up a new IRA every year? Then converting it at the appropriate time?

For instance, say I want to make my 2016 contribution - so I open up a regular IRA. Then convert it into a Roth IRA. Then next year, do I do the same thing again?: Open up a new IRA, then convert that one? Or do I somehow roll over that regular IRA $$ to my existing backdoor Roth?

And what's the best place to do this? I have a TD Ameritrade account. Can I do it with them?

Looks like somebody already answered this for me on another thread for anyone that's interested:

This is google-able, but short answer: no, because the first time you convert you have to convert your entire IRA portfolio to Roth, including any rollovers you have from previous jobs. You're taxed on any gains you've made (not contibutions), so most people roll any existing IRA's into their current 401k/TSP/what-have-you so that the tax basis will be lower, and only on the first 5500 you plan to convert. Then you put 5500 in a traditional the next year and roll it into your existing Roth. You end up with one traditional IRA account that's empty 355 days out of the year, and one Roth account that you convert new contributions into.

[Anonymous]

Thanks for this info!

New poster here. So if I have $600K in a Vanguard IRA account, I would need to dump that all into my current 401(k) in order to do a backdoor Roth? How do you evaluate the cost/benefit of the low Vanguard fees with the 401(k) management fees and tax-free Roth growth? Anyone have a calculator of some sort?

[Anonymous]

Anonymous wrote:

Anonymous wrote:I've read a lot about people doing Backdoor Roth IRAs. But I have a logistical question:

Do you keep opening up a new IRA every year? Then converting it at the appropriate time?

For instance, say I want to make my 2016 contribution - so I open up a regular IRA. Then convert it into a Roth IRA. Then next year, do I do the same thing again?: Open up a new IRA, then convert that one? Or do I somehow roll over that regular IRA $$ to my existing backdoor Roth?

And what's the best place to do this? I have a TD Ameritrade account. Can I do it with them?

Looks like somebody already answered this for me on another thread for anyone that's interested:

This is google-able, but short answer: no, because the first time you convert you have to convert your entire IRA portfolio to Roth, including any rollovers you have from previous jobs. You're taxed on any gains you've made (not contibutions), so most people roll any existing IRA's into their current 401k/TSP/what-have-you so that the tax basis will be lower, and only on the first 5500 you plan to convert. Then you put 5500 in a traditional the next year and roll it into your existing Roth. You end up with one traditional IRA account that's empty 355 days out of the year, and one Roth account that you convert new contributions into.

Would you mind linking the other thread? Thanks!

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I've read a lot about people doing Backdoor Roth IRAs. But I have a logistical question:

Do you keep opening up a new IRA every year? Then converting it at the appropriate time?

For instance, say I want to make my 2016 contribution - so I open up a regular IRA. Then convert it into a Roth IRA. Then next year, do I do the same thing again?: Open up a new IRA, then convert that one? Or do I somehow roll over that regular IRA $$ to my existing backdoor Roth?

And what's the best place to do this? I have a TD Ameritrade account. Can I do it with them?

Looks like somebody already answered this for me on another thread for anyone that's interested:

This is google-able, but short answer: no, because the first time you convert you have to convert your entire IRA portfolio to Roth, including any rollovers you have from previous jobs. You're taxed on any gains you've made (not contibutions), so most people roll any existing IRA's into their current 401k/TSP/what-have-you so that the tax basis will be lower, and only on the first 5500 you plan to convert. Then you put 5500 in a traditional the next year and roll it into your existing Roth. You end up with one traditional IRA account that's empty 355 days out of the year, and one Roth account that you convert new contributions into.

Would you mind linking the other thread? Thanks!

http://www.dcurbanmom.com/jforum/posts/list/105/623213.page

He randomly asked toward the end of this thread and I provided the above answer. If you need something more basic or in depth I'll try to help. I'm not an expert in the field, but I've done it myself.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I've read a lot about people doing Backdoor Roth IRAs. But I have a logistical question:

Do you keep opening up a new IRA every year? Then converting it at the appropriate time?

For instance, say I want to make my 2016 contribution - so I open up a regular IRA. Then convert it into a Roth IRA. Then next year, do I do the same thing again?: Open up a new IRA, then convert that one? Or do I somehow roll over that regular IRA $$ to my existing backdoor Roth?

And what's the best place to do this? I have a TD Ameritrade account. Can I do it with them?

Looks like somebody already answered this for me on another thread for anyone that's interested:

This is google-able, but short answer: no, because the first time you convert you have to convert your entire IRA portfolio to Roth, including any rollovers you have from previous jobs. You're taxed on any gains you've made (not contibutions), so most people roll any existing IRA's into their current 401k/TSP/what-have-you so that the tax basis will be lower, and only on the first 5500 you plan to convert. Then you put 5500 in a traditional the next year and roll it into your existing Roth. You end up with one traditional IRA account that's empty 355 days out of the year, and one Roth account that you convert new contributions into.

Would you mind linking the other thread? Thanks!

http://www.dcurbanmom.com/jforum/posts/list/105/623213.page

He randomly asked toward the end of this thread and I provided the above answer. If you need something more basic or in depth I'll try to help. I'm not an expert in the field, but I've done it myself.

Thanks - I am thinking of doing this. I finally make enough in my federal job to max out my TSP, and would like to start a backdoor roth. I don't have any IRA holdings, so I wouldn't need to worry about converting.

So it sounds like I need to do the following:
Open a traditional IRA with $5500.
Wait some period of time. (Does it matter how long?)
Transfer holdings from traditional IRA into Roth IRA.
Traditional IRA sits empty until next year.
Next year, I put another $5500 into the empty traditional IRA.
Wait some period of time.
Transfer holdings from traditional IRA into Roth IRA.
Wash, rinse, repeat.

Is this right?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I've read a lot about people doing Backdoor Roth IRAs. But I have a logistical question:

Do you keep opening up a new IRA every year? Then converting it at the appropriate time?

For instance, say I want to make my 2016 contribution - so I open up a regular IRA. Then convert it into a Roth IRA. Then next year, do I do the same thing again?: Open up a new IRA, then convert that one? Or do I somehow roll over that regular IRA $$ to my existing backdoor Roth?

And what's the best place to do this? I have a TD Ameritrade account. Can I do it with them?

Looks like somebody already answered this for me on another thread for anyone that's interested:

This is google-able, but short answer: no, because the first time you convert you have to convert your entire IRA portfolio to Roth, including any rollovers you have from previous jobs. You're taxed on any gains you've made (not contibutions), so most people roll any existing IRA's into their current 401k/TSP/what-have-you so that the tax basis will be lower, and only on the first 5500 you plan to convert. Then you put 5500 in a traditional the next year and roll it into your existing Roth. You end up with one traditional IRA account that's empty 355 days out of the year, and one Roth account that you convert new contributions into.

Would you mind linking the other thread? Thanks!

http://www.dcurbanmom.com/jforum/posts/list/105/623213.page

He randomly asked toward the end of this thread and I provided the above answer. If you need something more basic or in depth I'll try to help. I'm not an expert in the field, but I've done it myself.

I like when it's a question about food or restaurants, people assume it's a woman, and a question about finances, people assume it's a man. I'm not offended, it's just funny! Thank you for answering, PP.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I've read a lot about people doing Backdoor Roth IRAs. But I have a logistical question:

Do you keep opening up a new IRA every year? Then converting it at the appropriate time?

For instance, say I want to make my 2016 contribution - so I open up a regular IRA. Then convert it into a Roth IRA. Then next year, do I do the same thing again?: Open up a new IRA, then convert that one? Or do I somehow roll over that regular IRA $$ to my existing backdoor Roth?

And what's the best place to do this? I have a TD Ameritrade account. Can I do it with them?

Looks like somebody already answered this for me on another thread for anyone that's interested:

This is google-able, but short answer: no, because the first time you convert you have to convert your entire IRA portfolio to Roth, including any rollovers you have from previous jobs. You're taxed on any gains you've made (not contibutions), so most people roll any existing IRA's into their current 401k/TSP/what-have-you so that the tax basis will be lower, and only on the first 5500 you plan to convert. Then you put 5500 in a traditional the next year and roll it into your existing Roth. You end up with one traditional IRA account that's empty 355 days out of the year, and one Roth account that you convert new contributions into.

Would you mind linking the other thread? Thanks!

http://www.dcurbanmom.com/jforum/posts/list/105/623213.page

He randomly asked toward the end of this thread and I provided the above answer. If you need something more basic or in depth I'll try to help. I'm not an expert in the field, but I've done it myself.

Thanks - I am thinking of doing this. I finally make enough in my federal job to max out my TSP, and would like to start a backdoor roth. I don't have any IRA holdings, so I wouldn't need to worry about converting.

So it sounds like I need to do the following:
Open a traditional IRA with $5500.
Wait some period of time. (Does it matter how long?)
Transfer holdings from traditional IRA into Roth IRA.
Traditional IRA sits empty until next year.
Next year, I put another $5500 into the empty traditional IRA.
Wait some period of time.
Transfer holdings from traditional IRA into Roth IRA.
Wash, rinse, repeat.

Is this right?

Yep. There's some mixed advice out there on how long you have to wait -- some people say you can do it immediately and others say that since technically this is a loophole you don't want to draw the IRS's attention by being too blatant about it. I think that's a bit alarmist because I've never heard anyone getting audited or otherwise hassled for converting. I usually convert as soon as it's funded, so about 3-5 business days? If you use Vanguard they've switched from very simple (call and they'll walk you through it, and send you an itemized list to make sure you don't miss any steps) to ridiculously easy (push "convert to Roth for XXXX year" button under the applicable trad IRA on the website).

[Anonymous]

so the traditional-->backdoor IRA limit is 5500 regardless of whether you're contributing to a work-related 401K?

[Anonymous]

Anonymous wrote:so the traditional-->backdoor IRA limit is 5500 regardless of whether you're contributing to a work-related 401K?

Yes. For the worker, you can contribute up to $18k annually to your 401k (the lucky ones can get matches on top of that, up to $54k total). You can contribute $5500 annually to an IRA, Roth or otherwise.

[Anonymous]

Anonymous wrote:
Yep. There's some mixed advice out there on how long you have to wait -- some people say you can do it immediately and others say that since technically this is a loophole you don't want to draw the IRS's attention by being too blatant about it. I think that's a bit alarmist because I've never heard anyone getting audited or otherwise hassled for converting. I usually convert as soon as it's funded, so about 3-5 business days? If you use Vanguard they've switched from very simple (call and they'll walk you through it, and send you an itemized list to make sure you don't miss any steps) to ridiculously easy (push "convert to Roth for XXXX year" button under the applicable trad IRA on the website).

I do the same thing. Only wait a few days. Never had an issue.

[Anonymous]

Anonymous wrote:

Anonymous wrote:
Yep. There's some mixed advice out there on how long you have to wait -- some people say you can do it immediately and others say that since technically this is a loophole you don't want to draw the IRS's attention by being too blatant about it. I think that's a bit alarmist because I've never heard anyone getting audited or otherwise hassled for converting. I usually convert as soon as it's funded, so about 3-5 business days? If you use Vanguard they've switched from very simple (call and they'll walk you through it, and send you an itemized list to make sure you don't miss any steps) to ridiculously easy (push "convert to Roth for XXXX year" button under the applicable trad IRA on the website).

I do the same thing. Only wait a few days. Never had an issue.

Do it immediately or soon after so you don't have to worry about having any gains and having to pay taxes on them.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:
Yep. There's some mixed advice out there on how long you have to wait -- some people say you can do it immediately and others say that since technically this is a loophole you don't want to draw the IRS's attention by being too blatant about it. I think that's a bit alarmist because I've never heard anyone getting audited or otherwise hassled for converting. I usually convert as soon as it's funded, so about 3-5 business days? If you use Vanguard they've switched from very simple (call and they'll walk you through it, and send you an itemized list to make sure you don't miss any steps) to ridiculously easy (push "convert to Roth for XXXX year" button under the applicable trad IRA on the website).

I do the same thing. Only wait a few days. Never had an issue.

Do it immediately or soon after so you don't have to worry about having any gains and having to pay taxes on them.

If you left the money in cash there wouldn't be any taxes/gains on it.

[Anonymous]

I do mine with Fidelity. I end up opening a traditional IRA and then closing it when I transfer to ROTH. I tried leaving it open for the next year but it never works or there is some problem funding it the next year so I just open a new one.