Backdoor Roth Questions

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
chasebrown3
Posts: 3
Joined: Sun Aug 01, 2021 10:34 am

Backdoor Roth Questions

Post by chasebrown3 »

Hi, I’m new to the forum and to investing. I received a promotion around a year ago and have been able to pay off all debt excluding mortgage in that time period. I am now focusing on investing and learning all I can. I am currently not eligible to contribute to a Roth due to income, but I still want to utilize. I have opened tIRA’s for myself and wife. I am maxing out my 401K, but wanted to get recommendations on the backdoor Roth. Should I contribute monthly to each tIRA and immediately roll to Roth each month or should I wait until I receive my bonus and do the same thing with each account? This might be irrelevant, but I wasn’t sure if it made sense to do this monthly. Any thoughts would be appreciated.

Thanks, Chase
User avatar
retired@50
Posts: 12821
Joined: Tue Oct 01, 2019 2:36 pm
Location: Living in the U.S.A.

Re: Backdoor Roth Questions

Post by retired@50 »

Welcome to the forum. :happy

Have you seen the wiki page on the backdoor Roth IRA strategy?

See link: https://www.bogleheads.org/wiki/Backdoor_Roth

I suspect most people who use this strategy do a single trad. IRA contribution of $6,000 and convert it to a Roth IRA a couple days later.

Regards,
If liberty means anything at all it means the right to tell people what they do not want to hear. -George Orwell
User avatar
FiveK
Posts: 15742
Joined: Sun Mar 16, 2014 2:43 pm

Re: Backdoor Roth Questions

Post by FiveK »

chasebrown3 wrote: Sun Aug 01, 2021 11:23 am Should I contribute monthly to each tIRA and immediately roll to Roth each month or should I wait until I receive my bonus and do the same thing with each account?
On average, the market goes up, so the earlier you invest the better. Of course, "on average..." does not equal "it's guaranteed that...." Good luck!
User avatar
retiredjg
Posts: 54082
Joined: Thu Jan 10, 2008 11:56 am

Re: Backdoor Roth Questions

Post by retiredjg »

Welcome to the forum. :happy

In terms of long term wealth, it will not matter what you do.

I would not contribute monthly and do a Roth conversion each time. Just too much trouble. The easiest thing is to get/save the $6k, contribute to tIRA and convert the next day (or soonest day possible).

It is easier to do the paperwork for the contribution and the Roth conversion in the same calendar year. If you do the contribution for one year (say you get your bonus in January and contribute in January 2022 for 2021) and do the conversion in the next year it takes two years to document this on your taxes. This can be confusing for people who have not done it before.

The backdoor is easy to do and tricky to document on your taxes. Be sure you figure that out before getting iinvolved in this.
Topic Author
chasebrown3
Posts: 3
Joined: Sun Aug 01, 2021 10:34 am

Re: Backdoor Roth Questions

Post by chasebrown3 »

Thank you all for the input!
island
Posts: 1971
Joined: Tue Jul 23, 2013 1:45 pm

Re: Backdoor Roth Questions

Post by island »

Do you already have $ in trad IRAs? IF so how long has it been in there? If so that can create a problem with doing backdoor Roth.

Agree easiest to contribute in a lump sum and convert to Roth a couple of days later. Our income has been fairly predictable so we lump sum the annual max early every Jan.
Last edited by island on Sun Aug 01, 2021 5:52 pm, edited 1 time in total.
Statistical
Posts: 571
Joined: Tue Jul 06, 2021 1:08 pm

Re: Backdoor Roth Questions

Post by Statistical »

You can do it monthly but given backdoor Roth requires multiple steps most people just do a lump sum. Contribute $6K to tIRA (don't invest), wait for it to clear, convert the full $6K to rIRA, invest as you see fit.

You can do it in smaller chunks or even monthly just might involve effort than you want.
Topic Author
chasebrown3
Posts: 3
Joined: Sun Aug 01, 2021 10:34 am

Re: Backdoor Roth Questions

Post by chasebrown3 »

Island,

I made a very small contribution (not invested yet) to open up the tIRA about a week ago.
Post Reply