Backdoor + Front Door roth

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perplexed
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Backdoor + Front Door roth

Post by perplexed » Mon Feb 27, 2012 4:01 pm

Hello:

It appears that I can make a part of 5K regular Roth contribution. Is it possible to do both a backdoor and a front door roth contribution?

Thanks.

beareconomy
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Re: Backdoor + Front Door roth

Post by beareconomy » Mon Feb 27, 2012 4:07 pm

I think the contribution total for an ira per individual under 50 is 5k/year. So you can't do both a front and backdoor roth.

perplexed
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Re: Backdoor + Front Door roth

Post by perplexed » Mon Feb 27, 2012 4:11 pm

Thanks!

Assuming I am eligible for X amount, I can do the following combination then:

* Front Door Roth X
* Backdoor: contribute (5K-X) to a non-deductible IRA and then recharacterize it is a Roth.

The Wizard
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Re: Backdoor + Front Door roth

Post by The Wizard » Mon Feb 27, 2012 4:14 pm

perplexed wrote:Thanks!

Assuming I am eligible for X amount, I can do the following combination then:

* Front Door Roth X
* Backdoor: contribute (5K-X) to a non-deductible IRA and then recharacterize it is a Roth.
That would seem feasible to me, assuming you're in the phase-out zone based on AGI...
Attempted new signature...

BuckyBadger
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Re: Backdoor + Front Door roth

Post by BuckyBadger » Mon Feb 27, 2012 4:15 pm

Unless you have other tax consequences (i.e. other tIRAs) it might be easier to just make the whole thing backdoor? Then you only have to deal with the one transaction and you don't have to worry about figuring out how much "front door" Roth you are eligible for.

Unless I'm missing something, in which case I'm sure the rest of the Bogleheads will straighten me out!

BuckyBadger
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Re: Backdoor + Front Door roth

Post by BuckyBadger » Mon Feb 27, 2012 4:15 pm

double post
Last edited by BuckyBadger on Mon Feb 27, 2012 4:25 pm, edited 1 time in total.

perplexed
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Re: Backdoor + Front Door roth

Post by perplexed » Mon Feb 27, 2012 4:19 pm

I have no other IRA balance, so it would my first time doing this. I like the doing fully from the backdoor idea, but just curious if there is any long-term tax consequences.

Good to hear from a Wisconsin alumni ( I spent 6 years there).

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damjam
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Re: Backdoor + Front Door roth

Post by damjam » Mon Feb 27, 2012 4:21 pm

beareconomy wrote:I think the contribution total for an ira per individual under 50 is 5k/year. So you can't do both a front and backdoor roth.
I believe the OP is saying that they can make a partial Roth contribution, some amount less than 5K.
It seems the OP's income is in the phase out range for eligibility for Roth contributions.

So for example the OP can contribute 3K to a "front door" Roth and 2K to a non-deductible IRA then converting the 2K to a "backdoor" Roth.

To the OP, if you don't have any other IRAs to muddy up the basis for the conversion, I think what you proposing is kosher.
the IRS wrote: The maximum contribution that you can make to a traditional or Roth IRA is the smaller of $5,000 or the amount of your taxable compensation for 2012. This limit can be split between a traditional and a Roth IRA but the combined limit is $5,000.
From this IRS page.

NB:A non-deductible IRA is a traditional IRA.

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damjam
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Re: Backdoor + Front Door roth

Post by damjam » Mon Feb 27, 2012 4:29 pm

beareconomy wrote:I have no other IRA balance, so it would my first time doing this. I like the doing fully from the backdoor idea, but just curious if there is any long-term tax consequences.
When you convert you will have to pay tax on any of the earnings.
One consequence of doing it as one transaction, ie: one larger "backdoor" Roth, is there is a 5 year waiting period for withdrawal of conversions. Normal contributions to a Roth may be withdrawn at anytime without penalty, conversions must "age" 5 years.

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Epsilon Delta
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Re: Backdoor + Front Door roth

Post by Epsilon Delta » Mon Feb 27, 2012 8:52 pm

damjam wrote:One consequence of doing it as one transaction, ie: one larger "backdoor" Roth, is there is a 5 year waiting period for withdrawal of conversions.
During the five year waiting period after a conversion you pay a penalty on any withdrawal attributed to the taxable part of the conversion. For a back door Roth the taxable part of the conversion is minimal so the 5 year waiting period has little effect.

perplexed
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Re: Backdoor + Front Door roth

Post by perplexed » Tue Feb 28, 2012 12:24 pm

OK, a related question. If I contribute now for 2011, I am guessing my broker will not generate a new 1099-R. So, do I report it with my 2012 tax return?

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tfb
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Re: Backdoor + Front Door roth

Post by tfb » Tue Feb 28, 2012 8:41 pm

perplexed wrote:OK, a related question. If I contribute now for 2011, I am guessing my broker will not generate a new 1099-R. So, do I report it with my 2012 tax return?
What's "it"? Non-deductible contribution for 2011, report on 2011 return. Conversion in 2012, report on 2012 return.
Harry Sit, taking a break from the forums.

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baw703916
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Re: Backdoor + Front Door roth

Post by baw703916 » Tue Feb 28, 2012 8:45 pm

One exception is that if you have self-employment income you can set up an SEP IRA, and then later convert that to a Roth.
Most of my posts assume no behavioral errors.

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Epsilon Delta
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Re: Backdoor + Front Door roth

Post by Epsilon Delta » Wed Feb 29, 2012 2:40 pm

perplexed wrote:OK, a related question. If I contribute now for 2011, I am guessing my broker will not generate a new 1099-R. So, do I report it with my 2012 tax return?
If you make a contribution for 2011 between Jan 1st, 2011 and Apr 15th, 2012 (or whatever day Apr 15th falls on this year :) ) You report it on your 2011 return. A deductible IRA contribution will be on the 1040, and a non-deductible on for 8608.

This contribution will be reported on 2012 with a code showing it was for the previous year. All you have to do is make sure the 1099 is correct and file it. Many people think that the 1099 reporting for the previous year will confuse the IRS. It won't. It's the IRS's system; they know how it works.

david9117
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Re: Backdoor + Front Door roth

Post by david9117 » Wed Feb 29, 2012 3:04 pm

I use my Roth as an emergency fund. i.e. all the front door contributions can be withdrawn any time no questions asked. So every year I try to get as much in thru the front door and then the balance thru the back door. My eventual goal is to have my emergency fund only in front door roth contributions and I-bonds.

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