BolderBoy wrote:make_a_better_world wrote:For setting up the backdoor Roth- if I have a traditional IRA now with 3k in it, what should I do about this account? I have not contributed anything for 2013.
You'll take a tax hit in the short-term, but you can do the max tIRA contribution this year, then...
I would convert the ENTIRE tIRA to a rIRA this year, so that you have no tIRAs of any sort left on Dec 31, 2013 (but leave the empty account open - Vanguard will allow this, for example). Your income is going to be so high that you will not qualify for any deductible tIRA contributions going forward so there is nothing lost in doing this and the tax you'll pay on the Roth conversion this year is insignificant when compared with the backdoor Roth conversions you can do going forward.
Then, starting on Jan 2, 2014 do the backdoor Roth conversion trick that others have suggested. Repeat every year on Jan 2.
Having that small tIRA amount in the account will come up every year when you do the conversion if you leave it as is; it's a mess you probably want to avoid. Given the amount and the potential ongoing tax-sheltered space, converting it now is probably the best bet.
Remember your Form 8606 on the non-deductible contributions for this year and going forward; as BolderBoy said it will be a rinse-repeat each year after this one (and minimal taxes on any gains made during the brief waiting period your non-deductible contribution makes in the tIRA before converting). The wiki page has the details.