I am starting a new job soon and have a question regarding the income limits when contributing to a Roth IRA. My salary will have a high variable component, so I won’t know until the end of the year what my MAGI for 2013 ends up being. If I would like to max out my Roth IRA (as opposed to splitting between Traditional and Roth), how can I do this if I would like to dollar cost average into a Roth IRA during 2013? Do I need to wait until early 2014 once I know my MAGI and only then be able to determine whether and, if so how much, I can contribute to my Roth?
Thank you for any input you might have!
iat24 wrote: Thank you to each of you for the response. All help answer my question. I will max out my 401(k), wait until after year-end before contributing to my Roth, and not DCA during the year.
That's best. DCA is a waste of time anyway, especially on such small investments.
iat24 wrote:Thanks all. With respect to a backdoor Roth, I have read some people say to wait a certain period before converting from a traditional to a Roth. I assume the longer one waits, the higher the chance of paying more tax upon conversion. Is there a minimum number of days to wait before making the conversion?
There is no minimum amount of time to wait & no real reason to wait. Also, it's best to use a money market fund in the traditional IRA to avoid fluctuation. In practical terms, they money will be there for at least one day, and it's annoying to have to keep track of tiny +/- $10 market fluctuations. I had a $11 single-day loss in 2011 & it's still a factor in the tax return I'm preparing now.
See IRS Publication 590 pp. 65-66 for the official explanation.
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