Vanguard - repeated back door roth logistic question

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Topic Author
cadk
Posts: 12
Joined: Wed Dec 20, 2017 5:43 pm

Vanguard - repeated back door roth logistic question

Post by cadk »

Hi All,

I did my first backdoor roth last week with my vanguard account. It went smoothly, but I see that the original IRA account is still around. For folks that do these yearly, do you open a new IRA account each year or just contribute the limit to the old account and do the conversion again?

Having never done this before. I guess my real question is, if I did my '17 conversion in Dec and a '18 conversion before the April cutoff, for the prior year, is there any complications when doing the taxes given the two conversions had the same source IRA account?

Related question. I recently discovered that I am able to do a mega back door roth and my company's plan (Vanguard) support repeated in-service distributions. If I do multiple distributions / conversions throughout the year, does that cause any additional headache when filing taxes vs doing 1 or 2 conversions a year?

Thanks,
shess
Posts: 1012
Joined: Wed May 17, 2017 12:02 am

Re: Vanguard - repeated back door roth logistic question

Post by shess »

cadk wrote: Sat Dec 30, 2017 1:53 am I did my first backdoor roth last week with my vanguard account. It went smoothly, but I see that the original IRA account is still around. For folks that do these yearly, do you open a new IRA account each year or just contribute the limit to the old account and do the conversion again?
I expect that they keep all of the information for the account in their system for many years, so I don't think there would be any real benefit to attempting to get them to close the account, unless you really don't expect to use it again. I suppose it slightly simplifies your account overview, but most people don't have enough accounts to make it confusing. It's also convenient for you to be able to easily access records from the account without making a special request (though it's unnecessary, between their 1099-R and 5498 forms. But I'm OCD about such things, so I consider that access a benefit).
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Duckie
Posts: 8109
Joined: Thu Mar 08, 2007 2:55 pm

Re: Vanguard - repeated back door roth logistic question

Post by Duckie »

cadk wrote:I did my first backdoor roth last week with my vanguard account. It went smoothly, but I see that the original IRA account is still around. For folks that do these yearly, do you open a new IRA account each year or just contribute the limit to the old account and do the conversion again?
Since an empty account sticks around for a while, when it's time to contribute again just use the same empty TIRA.
Having never done this before. I guess my real question is, if I did my '17 conversion in Dec and a '18 conversion before the April cutoff, for the prior year, is there any complications when doing the taxes given the two conversions had the same source IRA account?
No. In the above case, one will be on your 2017 taxes and one on your 2018 taxes. (Contributions can be reported for prior years, but conversions are only reported for the current year.) Even if both conversions happened in the same year, it wouldn't matter.
I recently discovered that I am able to do a mega back door roth and my company's plan (Vanguard) support repeated in-service distributions. If I do multiple distributions / conversions throughout the year, does that cause any additional headache when filing taxes vs doing 1 or 2 conversions a year?
The conversions are totaled. If you did 10 conversions of $500 each you're going to get a 1099-R reporting total conversions of $5,000. This applies if you convert from an after-tax 401k to a Roth 401k, an after-tax 401k to a Roth IRA, or an after-tax TIRA to a Roth IRA.
Biglaw Investor
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Joined: Tue Oct 20, 2015 1:08 pm
Location: Brooklyn

Re: Vanguard - repeated back door roth logistic question

Post by Biglaw Investor »

cadk wrote: Sat Dec 30, 2017 1:53 am I did my first backdoor roth last week with my vanguard account. It went smoothly, but I see that the original IRA account is still around. For folks that do these yearly, do you open a new IRA account each year or just contribute the limit to the old account and do the conversion again?
No, I contribute to the old account each year and then convert to a Roth IRA. Very glad I don't have to go through the trouble of opening a new account each year!
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SmileyFace
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Joined: Wed Feb 19, 2014 10:11 am

Re: Vanguard - repeated back door roth logistic question

Post by SmileyFace »

I also reuse the same account every year.
I plan to contribute to IRA on Jan 2 then move it to Roth on Jan 3 or 4 (as soon as the money clears in the T-IRA).
Topic Author
cadk
Posts: 12
Joined: Wed Dec 20, 2017 5:43 pm

Re: Vanguard - repeated back door roth logistic question

Post by cadk »

Thanks for the replies.

Glad to hear that I can just re-use the same account. Makes life a bit easier :)
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