Average Investor wrote:I would like to open a Roth IRA this year. I am over the income limit for a deductible contribution so I am planning to do a Backdoor Roth.
Average Investor wrote:2012 MAGI estimated in the $150k range.
Do I need to set up the Traditional IRA and convert to the Roth IRA before the end of 2012?
itworks wrote:I also wanted to do a back door Roth IRA conversion. I just called Vanguard about 20 min ago, and the customer service explicitly told me the "conversion" is "calendar year" event, while "contribution" is "tax deadline event";
hence, she urged me to place an order before 4PM eastern time next Monday (12/31).
So I am confused. Assuming I make $5000 contribution in Feb. 2013 for year 2012
retiredjg wrote:It is not important if the contribution and conversion happen in the same year. In fact, you could make contributions for several years and only do one conversion. But we don't recommend that because your money might grow during that time, causing you to have to pay taxes on the earnings.
Default User BR wrote:retiredjg wrote:It is not important if the contribution and conversion happen in the same year. In fact, you could make contributions for several years and only do one conversion. But we don't recommend that because your money might grow during that time, causing you to have to pay taxes on the earnings.
I would recommend doing 2012 and 2013 at the same time, as you can make the contribution on the same day, and the conversion after. One would still need to fill out Form 8606 twice, once for 2012 to record the non-deductible contribution and one for 2013 doing that and the conversion.
Default User BR wrote:Assuming you are filing single, then yes backdoor would be in order. Generally speaking, IRA and 401(k) contributions don't intersect. You should have no trouble doing a conversion. There is no need to do it before 12/31 specifically. The contribution deadline is normal tax day, 4/15 in 2013. You can do the conversion anytime after the contribution. All that changes is which year's form records the conversion and any tax paid (hopefully zero).
Average Investor wrote:I set up and funded the tIRA yesterday. Set up the Roth today. To do the conversion do I simply exchange $5000 worth of shares from the tIRA to the Roth?
Default User BR wrote:The procedure varies by custodian. Contact yours to find out.
retiredjg wrote:See if you can do it online. Go to your tIRA and look for "rollover" and then pick "to Roth IRA" .
When I did this at Vanguard a few years ago, it seems like it was a couple of clicks of the mouse and it was done.