What's a good fund to do a backdoor Roth IRA with?

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JustinR
Posts: 1451
Joined: Tue Apr 27, 2010 11:43 pm

What's a good fund to do a backdoor Roth IRA with?

Post by JustinR »

I've read a tip somewhere to buy a fund that doesn't move much so the value doesn't change during the backdoor Roth IRA conversion. And then exchange the fund for what you actually want later.

Is this a good tip? What fund at Vanguard would be best for this?
kenner
Posts: 3128
Joined: Sat Mar 01, 2008 7:45 am

Re: What's a good fund to do a backdoor Roth IRA with?

Post by kenner »

A money market mutual fund (such as Vanguard Prime) is designed to have a constant value. Any high quality, very short term bond should be relatively stable.

How long will your conversion take?
avalpert
Posts: 6313
Joined: Sat Mar 22, 2008 4:58 pm

Re: What's a good fund to do a backdoor Roth IRA with?

Post by avalpert »

Why would you take yourself out of the market if you don't have to? Sow hat if it gains/loses that is why you are investing in the fund of your choice to begin with - worst case is it goes up a bit in the short period of time it takes to transfer and you pay a little bit of taxes on the gains.
rkhusky
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Joined: Thu Aug 18, 2011 8:09 pm

Re: What's a good fund to do a backdoor Roth IRA with?

Post by rkhusky »

Why would you care if you were out of the market for a few days with a small percentage of your portfolio? On average, you might gain a few cents, but if it requires more bookkeeping, I would avoid it.
JW-Retired
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Joined: Sun Dec 16, 2007 11:25 am

Re: What's a good fund to do a backdoor Roth IRA with?

Post by JW-Retired »

rkhusky wrote:Why would you care if you were out of the market for a few days with a small percentage of your portfolio? On average, you might gain a few cents, but if it requires more bookkeeping, I would avoid it.
It doesn't require any more bookkeeping. Only difference is the 8606 taxable amount of the conversion might not be exactly zero, or you might have a little non-zero carryover basis. Your tax software can handle a non-zero number just as well as a zero.
JW
Last edited by JW-Retired on Mon Oct 20, 2014 4:33 pm, edited 1 time in total.
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Brian2d
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Joined: Thu Jan 20, 2011 8:04 pm

Re: What's a good fund to do a backdoor Roth IRA with?

Post by Brian2d »

I deposit first to my traditional IRA money market. Once the contribution is posted (1-2 days) I transfer from traditional money market to Roth IRA in the fund I want (usually VTSAX or VTIAX).
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