Reply to Explain steps of back door Roth to me like I'm 5, please

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]This is OP again.  Is there any rush to convert, or can I just leave the money in the traditional IRA, report it as such on my 2023 taxes, and sort this out later?[/quote]

The "rush" to convert is usually because you pay taxes on any growth, so the sooner you can get it into a Roth the sooner your growth becomes tax-free.

Click the "convert to Roth IRA" button on Vanguard.  When you file your taxes either tell your tax preparer what you did, or do it yourself and be sure to file Form 8606.  You'll owe taxes on the growth, but if you didn't file taxes yet on the contribution (meaning, if you made the contribution this year), you won't "owe" taxes on the contribution, you just won't be able to deduct the contribution on your taxes.[/quote]

So when I go to withdraw later I’ll pay taxes on the growth?[/quote]

No, when you file your 2024 taxes you will pay taxes on any growth for the time period FROM the date you made the Traditional IRA contribution, TO the date of the Roth conversion. [/quote]

But what if there was no growth. I usually convert within days. [/quote]

Then you will owe nothing. This year we had $4 of growth in a few days because the settlement funds are paying above 5%, so the interest on $7000 is around $1/day.[/quote]

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