Backdoor Roth at Fidelity question

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sophie1
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Backdoor Roth at Fidelity question

Post by sophie1 »

I just did step 1, which is transfer cash from taxable to my traditional IRA account (which is otherwise empty).

Unlike prior years, I saw that Fidelity will allow me to transfer the money immediately to my Roth IRA, completing the backdoor process - without waiting for the transaction to settle. In years past, that took at least a week and I was unable to transfer funds in the meantime.

Should I transfer now or wait for settlement?? I'm just a bit worried that doing it before settlement could end up being interpreted as a direct Roth contribution. It's part of a general question of how long to wait. Initially, I waited until the trad IRA transfer showed up on a monthly statement, but I've gotten bolder as it appears the trad->Roth delay is a non-issue as far as the IRS is concerned.
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FiveK
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Re: Backdoor Roth at Fidelity question

Post by FiveK »

sophie1 wrote: Wed Jan 01, 2020 11:27 am...I saw that Fidelity will allow me to transfer the money immediately to my Roth IRA, completing the backdoor process - without waiting for the transaction to settle.

...it appears the trad->Roth delay is a non-issue as far as the IRS is concerned.
Correct on the delay being a non-issue.

Boils down to "do you trust Fidelity to issue the appropriate 1099-R form documenting that money came out of a tIRA first, not just directly into the Roth IRA?" If they are advertising this ability then I would tend to trust them, but it's your call.
Jermbo
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Re: Backdoor Roth at Fidelity question

Post by Jermbo »

Are you sure it will let you? I contributed to my fidelity traditional IRA today from my Fidelity checking and it says transfer is pending even though amount shows up in IRA. When I go to make a Roth conversion it says it will not let me due to funds needing to settle. I’ll be making my conversion tomorrow as it says funds will settle 1/02.
Jermbo
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Re: Backdoor Roth at Fidelity question

Post by Jermbo »

Nevermind, actually looks like it will allow conversion if I select partial account balance. If I select entire account balance it shows message that there are no shares available to be converted.
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BroIceCream
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Re: Backdoor Roth at Fidelity question

Post by BroIceCream »

Jermbo wrote: Wed Jan 01, 2020 5:19 pm Are you sure it will let you? I contributed to my fidelity traditional IRA today from my Fidelity checking and it says transfer is pending even though amount shows up in IRA. When I go to make a Roth conversion it says it will not let me due to funds needing to settle. I’ll be making my conversion tomorrow as it says funds will settle 1/02.
Mine actually would allow me to do it, but I am waiting until tomorrow for the backdoor. My reasoning is that if the dates are different (1/01 IRA vs. 1/02 Roth), then that will force the paperwork to be clear.
ERguy101
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Re: Backdoor Roth at Fidelity question

Post by ERguy101 »

Dang, mine still wont let me convert my trad IRA to the roth. It shows "cash available to withdraw" as 0, but shows all 6000 as settled. So I will give it another day or so
corp_sharecropper
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Re: Backdoor Roth at Fidelity question

Post by corp_sharecropper »

ERguy101 wrote: Thu Jan 02, 2020 10:34 am Dang, mine still wont let me convert my trad IRA to the roth. It shows "cash available to withdraw" as 0, but shows all 6000 as settled. So I will give it another day or so
In the same boat as you, contributed to the tIRA on Jan 1. I did my 2019 backdoor process just last month, same involved accounts and sequence of actions.... It took multiple business/market days for the tIRA funds to be "available for withdrawal", allowing the Roth conversion to take place. Kind of annoying given the balance earned almost $2 of interest while in limbo.

I did my wife's conversion at the same time. Surprisingly, Vanguard was much faster in allowing the conversion. I say surprisingly because I have found most tasks slower and more difficult at Vanguard than elsewhere.
boqnow
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Re: Backdoor Roth at Fidelity question

Post by boqnow »

I did this back in November/ early December. It wouldn't let me transfer until funds had settled which I thought was roughly 5 business days. On other thing to note, due to timing a dividend came in the same day as the transfer so I had to transfer another $1.50 or so to empty the tIRA
sco
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Re: Backdoor Roth at Fidelity question

Post by sco »

I’m also waiting and expecting tomorrow to be the day. 3 business days. Perhaps it will be 4 or 5
AllMostThere
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Re: Backdoor Roth at Fidelity question

Post by AllMostThere »

Yeah, I also had the same Fidelity experience of some backdoor delay. Not an instantaneous process to fund tIRA and transfer to ROTH IRA. Should expect at least one week from initiation to having funds available for investment in the ROTH. I started on Jan 1st (Holiday) and finally have my order in my & DW ROTH's to execute purchase of additional index funds today for re-balancing. I find it worth the wait and have an error free process. :beer
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FrugalProfessor
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Re: Backdoor Roth at Fidelity question

Post by FrugalProfessor »

Jermbo wrote: Wed Jan 01, 2020 5:29 pm Nevermind, actually looks like it will allow conversion if I select partial account balance. If I select entire account balance it shows message that there are no shares available to be converted.
I always have this same issue with Fidelity. I choose partial conversion then convert the whole amount. I'm able to fund the Trad IRA then convert the entire balance to Roth then invest in the Roth all in a couple of minutes.
I blog. Taxes are the lowest hanging source of alpha. I eat tax alpha for breakfast.
sco
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Re: Backdoor Roth at Fidelity question

Post by sco »

FrugalProfessor wrote: Mon Jan 06, 2020 1:29 pm
Jermbo wrote: Wed Jan 01, 2020 5:29 pm Nevermind, actually looks like it will allow conversion if I select partial account balance. If I select entire account balance it shows message that there are no shares available to be converted.
I always have this same issue with Fidelity. I choose partial conversion then convert the whole amount. I'm able to fund the Trad IRA then convert the entire balance to Roth then invest in the Roth all in a couple of minutes.

That gives me the same error. Guess I will try again tomorrow.
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FrugalProfessor
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Re: Backdoor Roth at Fidelity question

Post by FrugalProfessor »

sco wrote: Mon Jan 06, 2020 1:48 pm
FrugalProfessor wrote: Mon Jan 06, 2020 1:29 pm
Jermbo wrote: Wed Jan 01, 2020 5:29 pm Nevermind, actually looks like it will allow conversion if I select partial account balance. If I select entire account balance it shows message that there are no shares available to be converted.
I always have this same issue with Fidelity. I choose partial conversion then convert the whole amount. I'm able to fund the Trad IRA then convert the entire balance to Roth then invest in the Roth all in a couple of minutes.

That gives me the same error. Guess I will try again tomorrow.
Perhaps this is because I use my fidelity brokerage as my checking account. Therefore any transfers to a traditional IRA are not held up by any processing delays from external accounts.
I blog. Taxes are the lowest hanging source of alpha. I eat tax alpha for breakfast.
sco
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Re: Backdoor Roth at Fidelity question

Post by sco »

FrugalProfessor wrote: Mon Jan 06, 2020 1:54 pm
sco wrote: Mon Jan 06, 2020 1:48 pm
FrugalProfessor wrote: Mon Jan 06, 2020 1:29 pm
Jermbo wrote: Wed Jan 01, 2020 5:29 pm Nevermind, actually looks like it will allow conversion if I select partial account balance. If I select entire account balance it shows message that there are no shares available to be converted.
I always have this same issue with Fidelity. I choose partial conversion then convert the whole amount. I'm able to fund the Trad IRA then convert the entire balance to Roth then invest in the Roth all in a couple of minutes.

That gives me the same error. Guess I will try again tomorrow.
Perhaps this is because I use my fidelity brokerage as my checking account. Therefore any transfers to a traditional IRA are not held up by any processing delays from external accounts.
I believe that is the issue, this year for some reason I pulled in an ACH from an external account. So they are just waiting until everything is fully settled.
lkar
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Re: Backdoor Roth at Fidelity question

Post by lkar »

Same datapoint here. I transferred cash from fidelity taxable to tIRA on 1/1. I tried to convert it that same day by selecting the box that said transfer "entire" balance and it said I didn't have enough "shares." On 1/2, I tried again, but this time selected a "partial" transfer and just typed 7,000 in the box, and it transferred right away. I was able to trade in the roth IRA account (to add to a mutual fund) immediately -- the sale processed after market close on 1/2.
sco
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Re: Backdoor Roth at Fidelity question

Post by sco »

Still no joy for me.

1/1 transfer via ACH from 3rd party bank.

Still can't do a partial or full conversion, same error as previous.
SpideyIndexer
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Re: Backdoor Roth at Fidelity question

Post by SpideyIndexer »

Very odd slow process at Fidelity. I made a contribution to my traditional IRA at Fidelity 2 business days ago. Their system shows that funds have settled but will not allow me to transfer (convert) to a Roth. Their rep tells me this will take a total of 5 business days! This is incredibly slow for a Roth IRS also at Fidelity and disappointing.
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