Spouse's tIRA and backdoor Roth

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wacoach
Posts: 3
Joined: Thu Mar 22, 2018 9:44 am

Spouse's tIRA and backdoor Roth

Post by wacoach » Thu Mar 22, 2018 10:13 am

My wife and I have several different retirement accounts and our joint income exceeds the limit to make contributions directly to a Roth IRA. I am already maxing out my 401k and my wife isn't covered by a retirement plan at work.

A few relevant facts:
  • I have $170k in a traditional IRA that was rolled over from a previous employer's 401k
  • My wife has $11k in a 403b from a previous job
  • My wife has $20k in a spousal traditional IRA funded with deductible contributions
I'm interested in a backdoor Roth IRA, but I'm not willing to pay the taxes to convert my traditional IRA to a Roth. However, I could convert my wife's spousal IRA to a Roth and pay the taxes while staying in the 24% tax bracket. I'm just trying to understand a few logistics:
  • Am I understanding correctly that my traditional IRA won't cause an issue if the Roth IRA is in my wife's name?
  • I would like to make $5,500 backdoor contributions for each of 2017 and 2018, but classify the conversion of my wife's tIRA in 2018 because of the lower tax rates. Any issues with doing this?
  • Should I convert the existing tIRA to a Roth prior to making the 2017 and 2018 contributions or does the order not matter?
Any help or thoughts appreciated.

Thanks
Last edited by wacoach on Thu Mar 22, 2018 10:50 am, edited 1 time in total.

mhalley
Posts: 5610
Joined: Tue Nov 20, 2007 6:02 am

Re: Spouse's tIRA and backdoor Roth

Post by mhalley » Thu Mar 22, 2018 10:49 am

Yes, it is am INDIVIDUAL retirement arrangement, so spouse numbers do not matter. No problem with doing it the way you state. Doesn’t matter the order, but might as well wait till after the contributions so you only have to convert once.

JW-Retired
Posts: 6719
Joined: Sun Dec 16, 2007 12:25 pm

Re: Spouse's tIRA and backdoor Roth

Post by JW-Retired » Thu Mar 22, 2018 11:18 am

wacoach wrote:
Thu Mar 22, 2018 10:13 am
  • My wife has $11k in a 403b from a previous job
  • My wife has $20k in a spousal traditional IRA funded with deductible contributions
I'm interested in a backdoor Roth IRA, but I'm not willing to pay the taxes to convert my traditional IRA to a Roth. However, I could convert my wife's spousal IRA to a Roth and pay the taxes while staying in the 24% tax bracket.
  • I would like to make $5,500 backdoor contributions for each of 2017 and 2018, but classify the conversion of my wife's tIRA in 2018 because of the lower tax rates. Any issues with doing this?
A conversion at any date in the calendar year is always taxed in that year. You will need to make the contribution for 2017 before April 17th and put it on your 2017 tax return 8606 form as non-deductible. The 2018 contribution could be any time in the 2018 year or the next year before tax time. I would do it the same time as the 2017 contribution and then convert everything in the tIRA at once. You will pay 2018 tax on the $20k.

Welcome to the Forum!
JW
ps: To avoid messing up the paperwork like many do, dry run the 8606 forms for both years so you really understand how it works. (manufacture a 2018 form by penciling over "2017")
Retired at Last

wacoach
Posts: 3
Joined: Thu Mar 22, 2018 9:44 am

Re: Spouse's tIRA and backdoor Roth

Post by wacoach » Thu Mar 22, 2018 6:21 pm

Thanks to both of you for your replies. I'm clear on my path now.

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