luke0513 wrote:This is a good problem to have - My wife recently accepted a new job and we will be above the income phase out for our Roth IRA's next year. This is even assuming that I max my 401k (wife does not have 401k option), we will still be far above the limit in 2013.
I am in a similar (lucky!) situation.
It looks like my Adjusted Gross Income for 2012 will be just slightly under the $110k limit for a Single-Filing taxpayer. And I expect that with a small raise, higher anticipated bonuses, and more dividend income in the coming year, I will be over the limit.
I am planning to do a Backdoor Roth to avoid the limit. Since I have no other IRAs besides my Roth IRA to worry about, it should be a relatively simple process to do this through Vanguard, as I understand it:
- Open a Vanguard deductible IRA account separate from my Roth IRA account.
- Fund the deductible IRA account with $5,500 (new 2013 limit) on January 2.
- Convert to a Roth IRA as soon as possible, perhaps the next day.
- Pay whatever (minute) amount of tax I owe on the gains prior to conversion in my 2013 tax return.
Any caveats with these steps?