Should I do a Backdoor Roth?

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
Bossscoper
Posts: 2
Joined: Thu Apr 04, 2019 11:48 am

Should I do a Backdoor Roth?

Post by Bossscoper » Thu Apr 04, 2019 11:55 am

I asked my accountant at tax prep meeting yesterday, and he said he wouldn't recommend it, and "why bother?"

My situation:

Age 55, doctor. Income around 350-400k a year
3 kids, education paid for with 529's
Total (brokerage and 401k) stock/bonds of $3.3 million
Total real estate investments, all passive (hard money lending funds, syndicates, office complexes, apartment complexes etc) of about $2 million
Home equity about $1 million

I plan to retire with 5 years; still "worth it" to start a backdoor Roth now and do every year while I can?

Thanks for input!

EdLaFave
Posts: 395
Joined: Fri Dec 26, 2014 2:31 am

Re: Should I do a Backdoor Roth?

Post by EdLaFave » Thu Apr 04, 2019 12:38 pm

You’re asking a question about your personal preferences.

It is objectively in your best interest to do a Backdoor Roth. Everybody who would have to do a Backdoor Roth makes so much money that they certainly shouldn’t “need” the tax savings of the Backdoor Roth.

I did it for the first time in 2018. Mine was painful because it wasn’t planned. I contributed directly to my Roth IRA, but unexpectedly earned too much money to qualify. It was a pain to rollover my Traditional IRA to my employer’s 401k and it was a pain to reclassify my contribution (and its earnings) as Traditional.

Moving forward it’ll be trivial to make non-deductible contributions to a Traditional IRA and immediately convert it to Roth.

Ultimately it doesnt really matter, but I’m not going to choose to pay more tax than the law requires me to.
Last edited by EdLaFave on Thu Apr 04, 2019 2:08 pm, edited 1 time in total.

lakpr
Posts: 1887
Joined: Fri Mar 18, 2011 9:59 am

Re: Should I do a Backdoor Roth?

Post by lakpr » Thu Apr 04, 2019 1:33 pm

You would be saving $6000 times 5 years until retirement = $30k at most. Your assets are $3 million plus. Really it is a drop in the bucket in the overall picture. Agree with your accountant, why bother?

sarabayo
Posts: 276
Joined: Fri Jun 29, 2018 6:59 pm

Re: Should I do a Backdoor Roth?

Post by sarabayo » Thu Apr 04, 2019 3:26 pm

I wouldn't ask "why bother", I'd ask "why not bother?". Especially if you don't have any traditional IRAs to complicate the process, doing a backdoor Roth IRA contribution is very easy.

Sure, you'll only be able to put in $30k or so now, but that can grow a lot over the years, and the growth is tax free. You're 55 and have three kids. There are no RMDs for your Roth IRA until your death, which is (hopefully) several decades away. Even after that, if it's inherited by your surviving spouse, there are still no RMDs until their death. And even after that, if whoever inherits it (say, your kids or grandkids) elects for the term certain method of taking RMDs, the RMDs are small since they're spaced over the life expectancy of the recipient. Over the many decades in play here, even $30k could grow to a pretty large sum. (Well, everything is relative, but still.)

Another benefit of having a Roth IRA with some money in it is that you can buy and sell stuff inside it without incurring any capital gains taxes. Sure, it's only $30k to start off with, but it might be something fun to play with after you're retired, if that's your thing.

Topic Author
Bossscoper
Posts: 2
Joined: Thu Apr 04, 2019 11:48 am

Re: Should I do a Backdoor Roth?

Post by Bossscoper » Thu Apr 04, 2019 3:38 pm

Thanks very much for those opinions! I think I'm going with Sarabayo and will do it. The kids are still teens so over many decades probably worth it.

Thanks!

Post Reply