Author Topic: Back door Roth - newbie questions  (Read 371 times)

reformingSucka

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Back door Roth - newbie questions
« on: June 01, 2019, 06:25:01 AM »
Details for 2019:
Single
Phased out of Roth IRA contributions.
I contribute to an employer sponsored 401k plan. (Max)
I do NOT have any kind of existing IRA account. (I plan to open one, once I figure the logistics of Back door Roth out)
I do have a Vanguard Roth IRA account. (Open)

After doing a little research, hereís what Iíve come up with as my next steps:
1. Open up a traditional IRA account. (Planning to open account with Vanguard)
2. Put non-deductible money in new vanguard IRA account.
3. Convert traditional IRA to Roth IRA, in a day or so. (Choose appropriate investment, so that money put into IRA is not subject to losses/ gains while waiting to be converted)

Am I missing something? Or is it that simple given that I donít have an existing IRA account? And all of the money going into my Roth will be non-deductible income.

jamesbond007

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Re: Back door Roth - newbie questions
« Reply #1 on: June 04, 2019, 12:21:58 PM »
You got it. I just put non-deductible money to the limit allowed into the tIRA on Vanguard and let it sit there in their MMA for 2 or 3 days. Then convert it to Roth IRA. Vanguard makes it very easy. Just a few clicks. One thing to note: Since recharacterization is not allowed now, I would wait till December to initiate and complete this process especially if your income is somewhat variable. Doing this has some advantages as your Roth contributions are counted from Jan of the tax year, so you could take the principal out after 4 years and 1 month without a penalty.