Is an IRA conversion the same as a backdoor IRA?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
User avatar
Posts: 314
Joined: Wed Apr 05, 2017 1:19 pm
Location: California

Is an IRA conversion the same as a backdoor IRA?

Post by eye.surgeon » Thu Apr 20, 2017 12:32 pm

Vanguard changes their website interface so much that every year when I do my backdoor Roth IRA contribution it's a different method. This year it's different again. I have already contributed $5,500 into my traditional IRA account yesterday, now when I try to exchange that fund for a Roth IRA fund it asks me if I want to do a Roth conversion, as my only option. It's never termed it like that before. Is this what I want to do?
Last edited by eye.surgeon on Thu Apr 20, 2017 12:53 pm, edited 2 times in total.
"I would rather be certain of a good return than hopeful of a great one" | Warren Buffett

Posts: 1997
Joined: Wed Feb 21, 2007 4:57 am

Re: Is an IRA conversion the same as a backdoor IRA?

Post by Chip » Thu Apr 20, 2017 12:47 pm

Yes. The backdoor Roth is a non-deductible contribution to a traditional IRA followed by conversion of that IRA to a Roth.

Spirit Rider
Posts: 7833
Joined: Fri Mar 02, 2007 2:39 pm

Re: Is an IRA conversion the same as a backdoor IRA?

Post by Spirit Rider » Thu Apr 20, 2017 12:56 pm

Any movement from from a traditional IRA to a Roth IRA is a Roth conversion. It mechanically may be a same trustee inter-account transfer, a trustee - trustee transfer or an indirect rollover. Tax-wise it must always be reported as a Roth conversion on form 8606 even if there is no tax liability.

All backdoor Roths involve a Roth conversion, but not all Roth conversions are part of a backdoor Roth. A backdoor Roth always involves a non-deductible traditional IRA contribution followed by a Roth conversion regardless of what it was called. What makes it a true backdoor Roth, is when the Roth conversion has little to no tax liability.

Vanguard is probably changing the name so people know for sure that this is a Roth conversion. Maybe they had too many cases of uninformed people thinking they could just move the traditional IRA accounts to a Roth account with no tax liability.

Post Reply