Received a dividend from Fido in the few days before backdoor Roth.. now what?

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corp_sharecropper
Posts: 47
Joined: Thu Nov 07, 2013 2:36 pm

Received a dividend from Fido in the few days before backdoor Roth.. now what?

Post by corp_sharecropper » Sat Nov 30, 2019 2:46 pm

I deposited $6K into a new TIRA at Fidelity on the 24th. I've checked everyday since, and the funds are available to invest but still not available to withdraw/xfer to Roth IRA. Annoyingly, I received $1.06, as a dividend in these days. This is all core position, SPAXX, Fidelity gov money market.

So now what do I do? I wanted to convert the whole account balance, at $6K, to Roth. Now I will have this $1.06 left over, which is both annoying in that I have enough accounts as it is, and I don't know how to deal with it for future Roth backdoor instances.

Also, is it normal to take this many days from when I deposit money to when it's available to withdraw/convert? Oddly the $1.06 is available to withdraw/convert.

mcraepat9
Posts: 1382
Joined: Thu Jul 16, 2015 11:46 am

Re: Received a dividend from Fido in the few days before backdoor Roth.. now what?

Post by mcraepat9 » Sat Nov 30, 2019 2:48 pm

Convert it today and pay the taxes on the $1 in April 2020.

This is not worth your time to worry about.
Amateur investors are not cool-headed logicians.

retiredjg
Posts: 38477
Joined: Thu Jan 10, 2008 12:56 pm

Re: Received a dividend from Fido in the few days before backdoor Roth.. now what?

Post by retiredjg » Sat Nov 30, 2019 2:50 pm

Just convert the entire IRA to Roth and you'll pay taxes on the extra $1.06. You might also check in a month to be sure that more pennies don't show up in the tIRA. If they do, just convert them to Roth too.

KingRiggs
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Joined: Wed Dec 12, 2018 12:19 pm
Location: Indiana

Re: Received a dividend from Fido in the few days before backdoor Roth.. now what?

Post by KingRiggs » Sat Nov 30, 2019 2:51 pm

Convert it all. I’ll mail you a check for the tax on $1.06. :sharebeer
Advice = noun | Advise = verb | | Roth, not ROTH

livesoft
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Re: Received a dividend from Fido in the few days before backdoor Roth.. now what?

Post by livesoft » Sat Nov 30, 2019 3:00 pm

This is just a test from Fidelity to see if you actually understand what a backdoor Roth is and how to fill out your Form 8606.
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Topic Author
corp_sharecropper
Posts: 47
Joined: Thu Nov 07, 2013 2:36 pm

Re: Received a dividend from Fido in the few days before backdoor Roth.. now what?

Post by corp_sharecropper » Sat Nov 30, 2019 3:17 pm

mcraepat9 wrote:
Sat Nov 30, 2019 2:48 pm
Convert it today and pay the taxes on the $1 in April 2020.

This is not worth your time to worry about.
As mentioned, for some reason it won't let me convert it today or any days before. I don't understand why, they've had the money for days now.

KingRiggs
Posts: 326
Joined: Wed Dec 12, 2018 12:19 pm
Location: Indiana

Re: Received a dividend from Fido in the few days before backdoor Roth.. now what?

Post by KingRiggs » Sat Nov 30, 2019 3:39 pm

Convert whenever. Monday, Wednesday, whenever.

But if my check to you is more than $.35, I rescind my offer. :D
Advice = noun | Advise = verb | | Roth, not ROTH

mcraepat9
Posts: 1382
Joined: Thu Jul 16, 2015 11:46 am

Re: Received a dividend from Fido in the few days before backdoor Roth.. now what?

Post by mcraepat9 » Sat Nov 30, 2019 4:26 pm

Convert it whenever you can. No difference from a tax perspective if you do it next week.
Amateur investors are not cool-headed logicians.


Topic Author
corp_sharecropper
Posts: 47
Joined: Thu Nov 07, 2013 2:36 pm

Re: Received a dividend from Fido in the few days before backdoor Roth.. now what?

Post by corp_sharecropper » Mon Dec 02, 2019 10:56 am

fresh_boglehead wrote:
Sat Nov 30, 2019 4:36 pm
Related reading:
https://www.whitecoatinvestor.com/penni ... -roth-ira/

:sharebeer
Thank you! Now if you don't mind one more question, just double check/confirm...

I WILL: Convert my ENTIRE TIRA balance of $6001.37 to Roth IRA. I will then pay tax on $1. My Roth IRA will have $6001.37 on the day I convert.

I will NOT: Convert only $6000.00, leaving $1.37 in the TIRA. Not sure about taxes in this situation as my current understanding is this would be the incorrect action to take to begin with.


Do I have this right?

retiredjg
Posts: 38477
Joined: Thu Jan 10, 2008 12:56 pm

Re: Received a dividend from Fido in the few days before backdoor Roth.. now what?

Post by retiredjg » Mon Dec 02, 2019 2:10 pm

Yes, you have it right.

Katietsu
Posts: 2530
Joined: Sun Sep 22, 2013 1:48 am

Re: Received a dividend from Fido in the few days before backdoor Roth.. now what?

Post by Katietsu » Mon Dec 02, 2019 4:01 pm

corp_sharecropper wrote:
Mon Dec 02, 2019 10:56 am

Thank you! Now if you don't mind one more question, just double check/confirm...

I WILL: Convert my ENTIRE TIRA balance of $6001.37 to Roth IRA. I will then pay tax on $1. My Roth IRA will have $6001.37 on the day I convert.

I will NOT: Convert only $6000.00, leaving $1.37 in the TIRA. Not sure about taxes in this situation as my current understanding is this would be the incorrect action to take to begin with.

Do I have this right?
You have it right. I am not sure which step you believe is an incorrect action.

I almost always have earnings when I convert. It just means the software has to fill in a few extra lines.

From the perspective of what is allowed, you could leave the $6000 in the traditional IRA and convert a year from now(or whenever) with, for example, a balance of $7500. It is just that you would need to pay tax on $1500 whereas an immediate conversion would have allowed those earnings to be tax free forever. This is the reason that you are encouraged to convert sooner rather than later.

JW-Retired
Posts: 7146
Joined: Sun Dec 16, 2007 12:25 pm

Re: Received a dividend from Fido in the few days before backdoor Roth.. now what?

Post by JW-Retired » Mon Dec 02, 2019 4:48 pm

corp_sharecropper wrote:
Mon Dec 02, 2019 10:56 am
I WILL: Convert my ENTIRE TIRA balance of $6001.37 to Roth IRA. I will then pay tax on $1. My Roth IRA will have $6001.37 on the day I convert.

Do I have this right?
You are close.......... but next time it would be easier if you tell Fido to convert the full balance, whatever it may be. I know that Vanguard will interpret that "all" means the full balance, but don't know if the same works with Fido.
JW
Retired at Last

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