Author Topic: Sneaky backdoor Roth?  (Read 395 times)

FireAnt

  • Stubble
  • **
  • Posts: 218
  • Age: 34
  • Location: West Michigan
Sneaky backdoor Roth?
« on: August 06, 2019, 09:40:05 AM »
I'm guessing this is not possible, but the question was posed to me and it got me thinking. Because of our tax filing status (MFS) we can't contribute to a Roth IRA. So my husband has been doing a backdoor Roth. I haven't been able to since I already have an IRA with Vanguard and can't mix pre- and post-tax money.

Well, what if I opened an account with Fidelity and complete the backdoor Roth this way? This is a completely separate account so we don't have the concern with the pre and post tax being mixed.

Am I missing anything? Is this possible?

terran

  • Handlebar Stache
  • *****
  • Posts: 2441
Re: Sneaky backdoor Roth?
« Reply #1 on: August 06, 2019, 09:46:24 AM »
All IRAs are considered together regardless of where they're held, so you might get away with it for a time, but this is absolutely against the law and if you get caught (which seems likely) you'll have to take corrective action which will involve taking the money out, paying penalties and will be a pain.

Do you have a workplace retirement plan, or are any self employment income? Your workplace plan might allow you to roll the IRA in, or if you have self employment income you could open a solo 401(k) that would allow you to roll the IRA which would open the backdoor up to you.

FireAnt

  • Stubble
  • **
  • Posts: 218
  • Age: 34
  • Location: West Michigan
Re: Sneaky backdoor Roth?
« Reply #2 on: August 06, 2019, 07:07:06 PM »
All IRAs are considered together regardless of where they're held, so you might get away with it for a time, but this is absolutely against the law and if you get caught (which seems likely) you'll have to take corrective action which will involve taking the money out, paying penalties and will be a pain.

Do you have a workplace retirement plan, or are any self employment income? Your workplace plan might allow you to roll the IRA in, or if you have self employment income you could open a solo 401(k) that would allow you to roll the IRA which would open the backdoor up to you.

Good to know. I certainly don't want to break the law. I just thought it was a clever idea to keep the funds separate. No wonder I didn't read about it anywhere :)