Backdoor Roth at Schwab

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div
Posts: 26
Joined: Wed Aug 08, 2018 6:52 pm

Backdoor Roth at Schwab

Post by div »

How does one do backdoor Roth at Schwab?
I put in $6k in the Trad IRA account, now when I select option of "Convert Trad IRA to Roth IRA" it says:
A Roth conversion refers to the movement of assets from a Traditional (Contributory, Rollover, SEP-IRA or SIMPLE IRA) to a Roth IRA. The movement of assets is treated as a distribution from the Traditional IRA, and then as a conversion contribution into the Roth IRA.
and it seems I have to fill an online form.
Is this the right option to select? or should I open Roth IRA and simply do a transfer?
Alan S.
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Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: Backdoor Roth at Schwab

Post by Alan S. »

It is the right option. A conversion is a two part transaction - first a distribution and then a rollover to your Roth IRA.

Of course, for this conversion to be non taxable, this 6k must be the only non Roth IRA balance you have in this or any other IRA account. If not, the conversion will be mostly taxable using the pro rata calculation in Form 8606.
kaneohe
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Joined: Mon Sep 22, 2008 12:38 pm

Re: Backdoor Roth at Schwab

Post by kaneohe »

Also for this contribution to be considered a non-deductible contribution to TIRA, you must not take a deduction for it and must declare is as such and document your basis on 8606.
stilllurking
Posts: 151
Joined: Mon Jun 16, 2014 10:44 am

Re: Backdoor Roth at Schwab

Post by stilllurking »

kaneohe wrote: Mon Sep 16, 2019 3:14 pm Also for this contribution to be considered a non-deductible contribution to TIRA, you must not take a deduction for it and must declare is as such and document your basis on 8606.
I know this is an old thread but wanted to see if there were experiences like my question.

I have a Roth at Schwab that I transferred from Vanguard. I would like to do the backdoor Roth next year and do not have any non-Roth IRAs anywhere. If I open a brand new IRA in January and contribute the $6k, is there a holding period that it needs to stay in the non-Roth account before I can convert it to my Roth account. If there is a clearing period, is there a way I can get around it?
stilllurking
Posts: 151
Joined: Mon Jun 16, 2014 10:44 am

Re: Backdoor Roth at Schwab

Post by stilllurking »

Bumping to see if anyone knows.
kaneohe
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Joined: Mon Sep 22, 2008 12:38 pm

Re: Backdoor Roth at Schwab

Post by kaneohe »

don't know about Schwab specifically.........in the early days of backdoor Roth, there was some theory that you had to wait for some period of time to prevent IRS from thinking you were doing something sneaky. Nowadays that idea is not in vogue anymore so the common idea is that waiting period is not necessary. Do you make too much so you can't do a direct Roth contribution?
tenkuky
Posts: 1205
Joined: Sun Dec 14, 2014 4:28 pm

Re: Backdoor Roth at Schwab

Post by tenkuky »

stilllurking wrote: Sun Oct 11, 2020 9:08 pm
kaneohe wrote: Mon Sep 16, 2019 3:14 pm Also for this contribution to be considered a non-deductible contribution to TIRA, you must not take a deduction for it and must declare is as such and document your basis on 8606.
I know this is an old thread but wanted to see if there were experiences like my question.

I have a Roth at Schwab that I transferred from Vanguard. I would like to do the backdoor Roth next year and do not have any non-Roth IRAs anywhere. If I open a brand new IRA in January and contribute the $6k, is there a holding period that it needs to stay in the non-Roth account before I can convert it to my Roth account. If there is a clearing period, is there a way I can get around it?

I have done this 2 years in a row, I wait maybe 48 hours just to be kosher. And then convert it. Nothing to do with Schwab, they can do it the next day. Just remember that if you are funding from external account, there may be a holding period to settle, so I actually move the money internally from a brokerage account (I move TO the brokerage 4 days prior so it can settle there).
stilllurking
Posts: 151
Joined: Mon Jun 16, 2014 10:44 am

Re: Backdoor Roth at Schwab

Post by stilllurking »

This would be money from my bank account to the tIRA before converting to Roth.

One can't put the money during the last week of December to let the funds clear before converting right? Due to a balance being in the tIRA on December 31?
kaneohe
Posts: 6688
Joined: Mon Sep 22, 2008 12:38 pm

Re: Backdoor Roth at Schwab

Post by kaneohe »

stilllurking wrote: Sat Oct 17, 2020 9:49 am This would be money from my bank account to the tIRA before converting to Roth.

One can't put the money during the last week of December to let the funds clear before converting right? Due to a balance being in the tIRA on December 31?
should not be a problem since you are not doing the Roth conversion till next yr.
Try filling out form 8606 to see how this works.
illumination
Posts: 860
Joined: Tue Apr 02, 2019 6:13 pm

Re: Backdoor Roth at Schwab

Post by illumination »

stilllurking wrote: Sun Oct 11, 2020 9:08 pm
kaneohe wrote: Mon Sep 16, 2019 3:14 pm Also for this contribution to be considered a non-deductible contribution to TIRA, you must not take a deduction for it and must declare is as such and document your basis on 8606.
I know this is an old thread but wanted to see if there were experiences like my question.

I have a Roth at Schwab that I transferred from Vanguard. I would like to do the backdoor Roth next year and do not have any non-Roth IRAs anywhere. If I open a brand new IRA in January and contribute the $6k, is there a holding period that it needs to stay in the non-Roth account before I can convert it to my Roth account. If there is a clearing period, is there a way I can get around it?

No, I do the conversion immediately.

There is a way to do the entire thing online by yourself, but I "forget" every year and have a customer service rep walk me through it. Then I do it with my wife's account online after I learn how to do it for mine. I really should write down the steps next time. I just don't want to make a mistake and have a tax headache.

We both have T-IRA accounts there with a zero balance just for this purpose. We drop the money in, and there are links to then convert it, so essentially instant. I guess the exception would be "outside" funds that needed to clear first, but I just drop funds in from my regular brokerage account already there.

Definitely call and have them walk you through it, they will instantly know what you're talking about when you tell them "backdoor" Roth conversion.
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