How many of you did a Roth conversion the first day of 2017

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Namashkar
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How many of you did a Roth conversion the first day of 2017

Post by Namashkar » Tue Jan 03, 2017 9:05 pm

Wondering how many BHs do their Roth conversion the very first day of the year?

I did it.

Namashkar

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TheTimeLord
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Re: How many of you did a Roth conversion the first day of 2017

Post by TheTimeLord » Tue Jan 03, 2017 9:07 pm

Namashkar wrote:Wondering how many BHs do their Roth conversion the very first day of the year?

I did it.

Namashkar


Roth conversion or backdoor?
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livesoft
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Re: How many of you did a Roth conversion the first day of 2017

Post by livesoft » Tue Jan 03, 2017 9:08 pm

I had my spouse submit one over the long weekend, so I suppose it happened today.
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Namashkar
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Re: How many of you did a Roth conversion the first day of 2017

Post by Namashkar » Tue Jan 03, 2017 9:27 pm

TheTimeLord wrote:
Namashkar wrote:Wondering how many BHs do their Roth conversion the very first day of the year?

I did it.

Namashkar


Roth conversion or backdoor?


Either.

ved
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Re: How many of you did a Roth conversion the first day of 2017

Post by ved » Tue Jan 03, 2017 9:29 pm

How could you have done backdoor Roth on the first day?
It's a 2 step process:

Deposit funds in tIRA - 1 day
Convert to Roth IRA - 2nd day on whenever you want to.

So, the earliest you can backdoor Roth is on the 2nd (business) day of the year.

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Re: How many of you did a Roth conversion the first day of 2017

Post by livesoft » Tue Jan 03, 2017 9:34 pm

^A 2016 contribution could've been made in 2016 and converted today.

The money my spouse converted today was from the year 2000.
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ff4930
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Re: How many of you did a Roth conversion the first day of 2017

Post by ff4930 » Tue Jan 03, 2017 9:40 pm

I did it on 1/1/2017 :)

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Re: How many of you did a Roth conversion the first day of 2017

Post by JKahnDVM » Tue Jan 03, 2017 9:55 pm

I usually don't get around to it until late December.

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FIREchief
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Re: How many of you did a Roth conversion the first day of 2017

Post by FIREchief » Tue Jan 03, 2017 10:03 pm

One on Sunday, two more today.
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Davistax
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Re: How many of you did a Roth conversion the first day of 2017

Post by Davistax » Tue Jan 03, 2017 10:24 pm

Did one today. Will do another late in the year when I have a good idea what my taxable income will be.

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Re: How many of you did a Roth conversion the first day of 2017

Post by whaleknives » Tue Jan 03, 2017 10:36 pm

I couldn't manage it until January 21 last year. I want to finish last year's tax return and a current year estimate before I decide on the Roth conversion amount, and I'm at the mercy of the latest tax form.
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FIREchief
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Re: How many of you did a Roth conversion the first day of 2017

Post by FIREchief » Tue Jan 03, 2017 10:41 pm

whaleknives wrote:I couldn't manage it until January 21 last year. I want to finish last year's tax return and a current year estimate before I decide on the Roth conversion amount, and I'm at the mercy of the latest tax form.


You could always shoot for the max and do a partial recharacterization if you overshoot. 8-)
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Re: How many of you did a Roth conversion the first day of 2017

Post by mouth » Tue Jan 03, 2017 10:50 pm

I sent $5500 to my Vanguard tIRA on the first day of 2017 they allowed, 3 Jan. Tomorrow it will actually post and I will immediately backdoor it into my Roth IRA.

In the mean time, accumulation of my 2018 backdoor Roth funds begins this Friday (payday) when $211.54 will be sent to my taxable account where it will grow or shrink as the market will. Come 1 Jan 2018 I will move the requisite amount (hopefully more than $5500) to start the backdoor process again. I'll also gladly pay CG on any growth and I'll TLH on any losses. Win-Win in my book.

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whaleknives
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Re: How many of you did a Roth conversion the first day of 2017

Post by whaleknives » Tue Jan 03, 2017 10:56 pm

FIREchief wrote:
whaleknives wrote:I couldn't manage it until January 21 last year. I want to finish last year's tax return and a current year estimate before I decide on the Roth conversion amount, and I'm at the mercy of the latest tax form.

You could always shoot for the max and do a partial recharacterization if you overshoot. 8-)

But I'd have to be convinced that doing it twice would be worth it. :D
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Re: How many of you did a Roth conversion the first day of 2017

Post by Loandapper » Tue Jan 03, 2017 11:01 pm

mouth wrote:I sent $5500 to my Vanguard tIRA on the first day of 2017 they allowed, 3 Jan. Tomorrow it will actually post and I will immediately backdoor it into my Roth IRA.

In the mean time, accumulation of my 2018 backdoor Roth funds begins this Friday (payday) when $211.54 will be sent to my taxable account where it will grow or shrink as the market will. Come 1 Jan 2018 I will move the requisite amount (hopefully more than $5500) to start the backdoor process again. I'll also gladly pay CG on any growth and I'll TLH on any losses. Win-Win in my book.


But don't you end up with a million tax lots? (Or 26, to be exact?) How do you manage that?

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FIREchief
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Re: How many of you did a Roth conversion the first day of 2017

Post by FIREchief » Tue Jan 03, 2017 11:29 pm

whaleknives wrote:
FIREchief wrote:
whaleknives wrote:I couldn't manage it until January 21 last year. I want to finish last year's tax return and a current year estimate before I decide on the Roth conversion amount, and I'm at the mercy of the latest tax form.

You could always shoot for the max and do a partial recharacterization if you overshoot. 8-)

But I'd have to be convinced that doing it twice would be worth it. :D


Not sure if my suggestion was clear. With most/all brokerages (certainly Fidelity), if you convert $20,000 on Jan 1 and months later decide you only should have converted $15,000, you can just do a partial recharacterization of $5000 (plus earnings) back to a traditional IRA. As we point out constantly, it is imperative that the original conversion be made into a brand new, squeaky clean, absolutely empty Roth account.
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Re: How many of you did a Roth conversion the first day of 2017

Post by sunny_socal » Tue Jan 03, 2017 11:35 pm

FIREchief wrote:
whaleknives wrote:
FIREchief wrote:
whaleknives wrote:I couldn't manage it until January 21 last year. I want to finish last year's tax return and a current year estimate before I decide on the Roth conversion amount, and I'm at the mercy of the latest tax form.

You could always shoot for the max and do a partial recharacterization if you overshoot. 8-)

But I'd have to be convinced that doing it twice would be worth it. :D


Not sure if my suggestion was clear. With most/all brokerages (certainly Fidelity), if you convert $20,000 on Jan 1 and months later decide you only should have converted $15,000, you can just do a partial recharacterization of $5000 (plus earnings) back to a traditional IRA. As we point out constantly, it is imperative that the original conversion be made into a brand new, squeaky clean, absolutely empty Roth account.


What does the 'empty Roth' apply to?

It thought it was the other way around - that the tIRA account had to be empty at the end of the year.

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FIREchief
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Re: How many of you did a Roth conversion the first day of 2017

Post by FIREchief » Tue Jan 03, 2017 11:50 pm

sunny_socal wrote:
What does the 'empty Roth' apply to?


Any and all Roths that you convert tIRS dollars into that have even the slightest chance that you will later wish to recharacterize (either partial or complete) out of.

It is so simple to keep everything bullet-proof for the IRS, but we've learned (from countless other threads) that many have this strange aversion to spending 60 seconds to open a new Roth account for their conversions.
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TIAX
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Re: How many of you did a Roth conversion the first day of 2017

Post by TIAX » Wed Jan 04, 2017 12:01 am

FIREchief wrote: As we point out constantly, it is imperative that the original conversion be made into a brand new, squeaky clean, absolutely empty Roth account.

Why does the Roth have to be empty? You can recharacterize (or partially recharacterize) even if the Roth had other funds before the conversion.

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Re: How many of you did a Roth conversion the first day of 2017

Post by Phineas J. Whoopee » Wed Jan 04, 2017 12:04 am

Zero. US financial markets, and therefore IRA custodians, are closed on Sunday.
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Re: How many of you did a Roth conversion the first day of 2017

Post by Saphomd » Wed Jan 04, 2017 12:38 am

Did a backdoor Roth conversion for 2016 about 2 weeks ago ($6500.00). Will do another backdoor Roth in about 2 months. :)

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Re: How many of you did a Roth conversion the first day of 2017

Post by FIREchief » Wed Jan 04, 2017 12:39 am

TIAX wrote:
FIREchief wrote: As we point out constantly, it is imperative that the original conversion be made into a brand new, squeaky clean, absolutely empty Roth account.

Why does the Roth have to be empty? You can recharacterize (or partially recharacterize) even if the Roth had other funds before the conversion.


Good luck with that!!! :sharebeer
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Re: How many of you did a Roth conversion the first day of 2017

Post by TIAX » Wed Jan 04, 2017 1:00 am

FIREchief wrote:
TIAX wrote:
FIREchief wrote: As we point out constantly, it is imperative that the original conversion be made into a brand new, squeaky clean, absolutely empty Roth account.

Why does the Roth have to be empty? You can recharacterize (or partially recharacterize) even if the Roth had other funds before the conversion.


Good luck with that!!! :sharebeer

I've done it with a simple phone call to Vanguard. If you know something that we don't, do share.

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FIREchief
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Re: How many of you did a Roth conversion the first day of 2017

Post by FIREchief » Wed Jan 04, 2017 1:51 am

TIAX wrote:
FIREchief wrote:
TIAX wrote:
FIREchief wrote: As we point out constantly, it is imperative that the original conversion be made into a brand new, squeaky clean, absolutely empty Roth account.

Why does the Roth have to be empty? You can recharacterize (or partially recharacterize) even if the Roth had other funds before the conversion.


Good luck with that!!! :sharebeer

I've done it with a simple phone call to Vanguard. If you know something that we don't, do share.


I may have been mistaken. Just do what you think is best. 8-)
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BAM!
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Re: How many of you did a Roth conversion the first day of 2017

Post by BAM! » Wed Jan 04, 2017 2:00 am

What if there's $0.01 in your TIRA and you add $5500, then convert it to backdoor Roth IRA. What are the implications/penalties?

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Re: How many of you did a Roth conversion the first day of 2017

Post by itstoomuch » Wed Jan 04, 2017 2:01 am

I did our final 2016 conversion, a small amount on the Dec 30, Friday, on doing preliminary 2016 tax.
I may do some more conversions in Jan 2017. Not sure from which pile in Discretionary. The funds are already in cash. It is just a matter if I want to convert to Roth or take withdrawals into taxables. I already know what our 2017 income will look like since we have defined Income sources :wink: . The 2017 real question, is what will be the medical deductions look like :? :( :( . The more medical, more conversions :annoyed Not a good trade off :( :| IMO.

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Re: How many of you did a Roth conversion the first day of 2017

Post by Caduceus » Wed Jan 04, 2017 2:03 am

I've been tempted to do it but always wondered about the date of application.

The only way to do that would be if you sent off the application in 2016 (a few days before 2017 began). From a tax/legal perspective, I wasn't sure if it mattered that the application for conversion was dated in 2016 even if the actual conversion took place in 2017.

Related question: is pre or post-dating documents OK for this reason? Say Livesoft wants to convert on the first day of a year and sends in a document on Dec 29, but dates and signs it as Jan 1, 2017. Is there anything wrong with this?

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FIREchief
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Re: How many of you did a Roth conversion the first day of 2017

Post by FIREchief » Wed Jan 04, 2017 2:21 am

Caduceus wrote:I've been tempted to do it but always wondered about the date of application.

The only way to do that would be if you sent off the application in 2016 (a few days before 2017 began). From a tax/legal perspective, I wasn't sure if it mattered that the application for conversion was dated in 2016 even if the actual conversion took place in 2017.

Related question: is pre or post-dating documents OK for this reason? Say Livesoft wants to convert on the first day of a year and sends in a document on Dec 29, but dates and signs it as Jan 1, 2017. Is there anything wrong with this?


If your brokerage doesn't support this entire process on-line, real time, you may wish to consider finding a new brokerage. My personal recommendation would be Fidelity, but that's likely a different thread.... 8-)
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Re: How many of you did a Roth conversion the first day of 2017

Post by Epsilon Delta » Wed Jan 04, 2017 2:27 am

FIREchief wrote:
TIAX wrote:
FIREchief wrote:
TIAX wrote:
FIREchief wrote: As we point out constantly, it is imperative that the original conversion be made into a brand new, squeaky clean, absolutely empty Roth account.

Why does the Roth have to be empty? You can recharacterize (or partially recharacterize) even if the Roth had other funds before the conversion.


Good luck with that!!! :sharebeer

I've done it with a simple phone call to Vanguard. If you know something that we don't, do share.


I may have been mistaken. Just do what you think is best. 8-)


If you convert into a non-empty Roth and then reconvert the rules for calculating the earnings (or loss) include all the assets in the Roth. The rules aren't hard and don't tax Vangaurd's Commodore 64 but it's not quite the result the naive customer would expect. Sometimes it's higher and sometimes it's lower but if you do it a few times without paying attention it will probably average out.

What requires use of separate Roth accounts is if you want to tactically recharacterize based on asset performance. For example converting two different assets and recharacterizing the worst performer requires that the two conversions be done into different accounts. There are various ways to do this, but arguably the simplest is to create a new (empty) Roth for every conversion.

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Re: How many of you did a Roth conversion the first day of 2017

Post by JimmyD » Wed Jan 04, 2017 2:29 am

Not I, but planning to as soon as I have the available funds.

First priority is paying off wife's vehicle and hope to have that done in four months or so.

Then, need to bump emergency fund up a bit since I had to raid it last year to fund our Roth contributions.

So, it'll likely be toward the end of the year before we get the Roths funded for 2017.

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Re: How many of you did a Roth conversion the first day of 2017

Post by SGM » Wed Jan 04, 2017 8:54 am

Nothing left to convert since 2015. It is best to convert in January of 2017 so you have until October 15 of 2018 to recharacterize should you want to. To make sure there were no screw ups I would up the date to recharacterize to Sept 15 of 2018.

I usually add to kid's Roth IRAs in January usually with a letter to Vanguard to get it done as early as possible, but this year I will wait until I receive Roth deposit slips later in January. I have better things to do in retirement than get every last day of never to be taxed income for the kiddies.

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Re: How many of you did a Roth conversion the first day of 2017

Post by miles monroe » Wed Jan 04, 2017 9:40 am

not yet...i'm market timing! :)

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Re: How many of you did a Roth conversion the first day of 2017

Post by whaleknives » Wed Jan 04, 2017 3:15 pm

FIREchief wrote:I may have been mistaken. Just do what you think is best. 8-)

That's what I'm doing. 8-)
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Re: How many of you did a Roth conversion the first day of 2017

Post by veggivet » Wed Jan 04, 2017 3:19 pm

Yup, just like last year. Also maxed out ROTH IRA, ROTH 401k, and HSA contributions for 2017.

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Re: How many of you did a Roth conversion the first day of 2017

Post by AdamP » Wed Jan 04, 2017 3:23 pm

Roth conversion (not for backdoor purposes) done this week. I'm taking advantage of some lean year(s) coming up, and I have a 15% bracket I can fill trying to "even out" my Roth v. Traditional balances.

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Re: How many of you did a Roth conversion the first day of 2017

Post by mortalsonofmortal » Wed Jan 04, 2017 5:09 pm

Newbie here. Could someone explain the advantage of doing this? I just do regular contributions to my Roth IRA every month. Did a google search and found that it is usually used by people who's higher income does not allow them to otherwise make contributions to Roth IRA. Can the same concept be used by a medium income person to contribute more than $5500 to their Roth IRA?

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Re: How many of you did a Roth conversion the first day of 2017

Post by ved » Wed Jan 04, 2017 5:29 pm

mortalsonofmortal wrote:Newbie here. Could someone explain the advantage of doing this? I just do regular contributions to my Roth IRA every month. Did a google search and found that it is usually used by people who's higher income does not allow them to otherwise make contributions to Roth IRA. Can the same concept be used by a medium income person to contribute more than $5500 to their Roth IRA?


I don't know what you are asking here (see bolded question above). If you are asking about converting to Roth, this is a procedure (called backdoor Roth conversion) for high income people that are precluded from contributing to the Roth IRA directly. So, they contribute to a traditional IRA (as a non-deductible amount), and then (as early as the next day or later) convert that to Roth IRA.

The contribution limit is $5,500 for 2017, regardless if it is contribution to a traditional IRA (deductible), traditional IRA (non-deductible) / backdoor Roth, or directly to Roth IRA as you are contributing.

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FIREchief
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Re: How many of you did a Roth conversion the first day of 2017

Post by FIREchief » Thu Jan 05, 2017 2:31 pm

FIREchief wrote:
TIAX wrote:
FIREchief wrote:
TIAX wrote:
FIREchief wrote: As we point out constantly, it is imperative that the original conversion be made into a brand new, squeaky clean, absolutely empty Roth account.

Why does the Roth have to be empty? You can recharacterize (or partially recharacterize) even if the Roth had other funds before the conversion.


Good luck with that!!! :sharebeer

I've done it with a simple phone call to Vanguard. If you know something that we don't, do share.


I may have been mistaken. Just do what you think is best. 8-)


Perhaps I wasn't mistaken after all! It may not always be just a "simple phone call to Vanguard." Check out this current thread:

viewtopic.php?f=1&t=207349
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Re: How many of you did a Roth conversion the first day of 2017

Post by Peter Foley » Thu Jan 05, 2017 3:04 pm

Using a Roth with a zero balance makes the recharcterization much more transparent. You know you converted X, now it is worth Y. You know what you tax liability is for the year. You can decide if recharcterization is worth it or not.

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Re: How many of you did a Roth conversion the first day of 2017

Post by RustyShackleford » Thu Jan 05, 2017 4:43 pm

Not yet. I'll wait to get a better handle on what my other income will be (I'm a retiree), like from dividends, etc, so I can fine tune the Roth conversion amount to exactly "fill" my 15% federal marginal tax bracket.

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Re: How many of you did a Roth conversion the first day of 2017

Post by FIREchief » Thu Jan 05, 2017 4:47 pm

RustyShackleford wrote:Not yet. I'll wait to get a better handle on what my other income will be (I'm a retiree), like from dividends, etc, so I can fine tune the Roth conversion amount to exactly "fill" my 15% federal marginal tax bracket.


Why not just shoot high and do a partial recharacterization to dial back into your final desired amount? :confused
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Re: How many of you did a Roth conversion the first day of 2017

Post by Artsdoctor » Thu Jan 05, 2017 5:27 pm

FIREchief wrote:
RustyShackleford wrote:Not yet. I'll wait to get a better handle on what my other income will be (I'm a retiree), like from dividends, etc, so I can fine tune the Roth conversion amount to exactly "fill" my 15% federal marginal tax bracket.


Why not just shoot high and do a partial recharacterization to dial back into your final desired amount? :confused


It took me a while to warm to this because our marginal rate has nearly always been high. However, there are occasional years where we're in the "sweet spot" of the AMT 28% marginal rate (I know, it's not 15% but it's the best I think we'll ever be able to do).

Unless I know for a fact that the marginal rate will be extremely high, I'll convert money over in January or February, and then I can see the next year what my true marginal rate is. One has until the fall of the following year of the conversion to commit or recharacterize, and it's really easy to do the latter. However, to make my life easier, I convert into a newly opened Roth to make bookkeeping easier.

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Re: How many of you did a Roth conversion the first day of 2017

Post by The Wizard » Thu Jan 05, 2017 7:51 pm

Why not just use a single Vanguard Roth IRA, but with all previous money in total stock market VTSAX, for instance.
Then for this year's contribution, put $5500 into the s&p 500 fund, VFINX. That makes it easy to track the progress of this year's contrib in case you want to recharacterize.
Am I missing something??
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Re: How many of you did a Roth conversion the first day of 2017

Post by JustCurious304 » Thu Jan 05, 2017 8:48 pm

I converted some of my TIRA to my Roth in 2016 and will look at the total tax situation to determine if I do it again this year.

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Re: How many of you did a Roth conversion the first day of 2017

Post by mouth » Sat Jan 21, 2017 3:01 pm

Loandapper wrote:
mouth wrote:I sent $5500 to my Vanguard tIRA on the first day of 2017 they allowed, 3 Jan. Tomorrow it will actually post and I will immediately backdoor it into my Roth IRA.

In the mean time, accumulation of my 2018 backdoor Roth funds begins this Friday (payday) when $211.54 will be sent to my taxable account where it will grow or shrink as the market will. Come 1 Jan 2018 I will move the requisite amount (hopefully more than $5500) to start the backdoor process again. I'll also gladly pay CG on any growth and I'll TLH on any losses. Win-Win in my book.


But don't you end up with a million tax lots? (Or 26, to be exact?) How do you manage that?


Yes I will but that doesn't mean I have to sell THOSE lots to fund my Roth. I'll sell the ones with losses / the least gains which might include some older lots, or not. Its as easy as clicking a check box up to 26 times. Hardly seems a hardship once a year.

I'm also putting more than just 211.54 in for each of those 26 since I have more total monies that I want invested per pay period. But in the end, so what? What's the alternative? I'll live with 26 lots if it means more time in the market and less chance I'll "borrow" from it.

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Re: How many of you did a Roth conversion the first day of 2017

Post by lazydavid » Sun Jan 22, 2017 11:24 am

SGM wrote:I usually add to kid's Roth IRAs in January usually with a letter to Vanguard to get it done as early as possible, but this year I will wait until I receive Roth deposit slips later in January. I have better things to do in retirement than get every last day of never to be taxed income for the kiddies.


I assume these are adult children with jobs? Because I'm pretty sure it's illegal to contribute to an IRA in an amount that exceeds the employment compensation (wages, to think of it simply) of the account holder. Usually children referred to as "kiddies" have an annual income of $0, and are therefore ineligible for any IRA contributions, even as a gift from someone else.

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Re: How many of you did a Roth conversion the first day of 2017

Post by Namashkar » Sun Jan 22, 2017 1:29 pm

FIREchief wrote:One on Sunday, two more today.


HI FIREchief,

Did you use different assets (funds or combination of stock and bonds) for your initial 2017
Conversions?

Namashkar

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FIREchief
Posts: 1359
Joined: Fri Aug 19, 2016 6:40 pm

Re: How many of you did a Roth conversion the first day of 2017

Post by FIREchief » Sun Jan 22, 2017 4:50 pm

Namashkar wrote:
FIREchief wrote:One on Sunday, two more today.


HI FIREchief,

Did you use different assets (funds or combination of stock and bonds) for your initial 2017
Conversions?

Namashkar


I use identical assets (equity fund shares) in a leap frog type strategy.

I think you're describing the horse race approach.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

SGM
Posts: 2387
Joined: Wed Mar 23, 2011 4:46 am

Re: How many of you did a Roth conversion the first day of 2017

Post by SGM » Mon Jan 23, 2017 5:09 am

lazydavid wrote:
SGM wrote:I usually add to kid's Roth IRAs in January usually with a letter to Vanguard to get it done as early as possible, but this year I will wait until I receive Roth deposit slips later in January. I have better things to do in retirement than get every last day of never to be taxed income for the kiddies.


I assume these are adult children with jobs? Because I'm pretty sure it's illegal to contribute to an IRA in an amount that exceeds the employment compensation (wages, to think of it simply) of the account holder. Usually children referred to as "kiddies" have an annual income of $0, and are therefore ineligible for any IRA contributions, even as a gift from someone else.


I was being a little flippant in calling them kiddies. Of course they have jobs with income. They are still young but can afford and do live on their own.

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