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Backdoor Roth

Posted: Wed Jan 23, 2019 11:16 am
by ACJC
So what if you completed a backdoor Roth at the beginning of the year but you actually made less money than you thought you were going to? Is there tax implications? A way to reverse it?

Thank you 😊

Re: Backdoor Roth

Posted: Wed Jan 23, 2019 11:34 am
by 2cents2
Trying to clarify what you mean by this: "you actually made less money than you thought you were going to",

Did you contribute more than you earned to a Roth? Or, do you mean you were were still eligible to make a direct contribution to a Roth?

Re: Backdoor Roth

Posted: Wed Jan 23, 2019 11:44 am
by chambers136
If you mean that you thought you were going to reach the phase out income limit that prevents a direct Roth contribution, but didn’t quite make enough and actually could have done a direct contribution, from what I understand you can still perform the backdoor Roth procedure without any penalties

Re: Backdoor Roth

Posted: Wed Jan 23, 2019 12:42 pm
by mark1623
Any gains would have been subject to taxes in a traditional IRA. Since they took place in the Roth, those gains are tax-free if not taken until retirement. Don't worry about the returns over one year.

Also, no, you no longer can recharacterize (i.e. reverse) a Roth conversion once the end of the year has passed.

Re: Backdoor Roth

Posted: Wed Jan 23, 2019 1:07 pm
by ACJC
We file married and did 2 backdoor Roth’s at the beginning of the year because we thought we would make more than 199,000 jointly but we actually made less money?

Re: Backdoor Roth

Posted: Wed Jan 23, 2019 1:09 pm
by fposte
That's okay. You're eligible to do a Roth conversion anyway. I do a backdoor Roth at the start of the year because my income tends to hover around the limit, and if I do a backdoor I can just contribute right away without waiting to see what my income is so I'm good either way.

Re: Backdoor Roth

Posted: Wed Jan 23, 2019 1:30 pm
by ACJC
Perfect! Thank you 😊 It’s better to safe then :)

Re: Backdoor Roth

Posted: Wed Jan 23, 2019 1:38 pm
by PhysicianOnFIRE
Not a problem at all.

Everyone can do the backdoor Roth regardless of income (as long as you have the $6,000 in earned income, anyway). If you end up earning less than anticipated and don't have income in or above the phaseout range, the only downside is that you could have saved a step and contributed directly.

:beer
-PoF

Re: Backdoor Roth

Posted: Wed Jan 23, 2019 1:56 pm
by ACJC
Awesome!! And you just made my day!! I love your blog and follow you!!! And because of your blog we contributed to Roth for the first time!! And maxed out 401ks! Thank you!! :beer