Backdoor Roth: How Long To Wait For Conversion?
Backdoor Roth: How Long To Wait For Conversion?
I'm just curious what others here do for this, something like a poll...
When doing a backdoor Roth conversion, how long do you wait to perform the conversion from the traditional IRA to the Roth IRA? A day or a few days? A week or a few weeks? Do you wait for one "statement cycle" to pass? Do you wait months or even until the next calendar year? If you work with an adviser (I know, pretty rare around here), what do they recommend?
To answer my own question, in the past I have done this within a day or two and one time even on the same day. I recently updated my IPS to indicate that I will wait "three complete business days" (ex: deposit on Monday, convert on Friday), which I will do starting in 2016. I generally agree with the discussion about the Step Transaction Doctrine laid out by the WhiteCoatInvestor here.
When doing a backdoor Roth conversion, how long do you wait to perform the conversion from the traditional IRA to the Roth IRA? A day or a few days? A week or a few weeks? Do you wait for one "statement cycle" to pass? Do you wait months or even until the next calendar year? If you work with an adviser (I know, pretty rare around here), what do they recommend?
To answer my own question, in the past I have done this within a day or two and one time even on the same day. I recently updated my IPS to indicate that I will wait "three complete business days" (ex: deposit on Monday, convert on Friday), which I will do starting in 2016. I generally agree with the discussion about the Step Transaction Doctrine laid out by the WhiteCoatInvestor here.
Even a stopped clock is right twice a day.
Re: Backdoor Roth: How Long To Wait For Conversion?
I wait several days, one week at most.
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Re: Backdoor Roth: How Long To Wait For Conversion?
I put the traditional in a Vanguard Money Market Fund. I convert to Total Stock Market in Roth on a day when the market is down. It's usually within 1-2 weeks.
Re: Backdoor Roth: How Long To Wait For Conversion?
I wait months but within the same calendar year. The money is invested from day one, not left in a money market fund. Michael Kitces, an advisor, recommended waiting a year.powermega wrote:Do you wait months or even until the next calendar year? If you work with an adviser (I know, pretty rare around here), what do they recommend?
How To Do A Backdoor Roth IRA Contribution (Safely)
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Re: Backdoor Roth: How Long To Wait For Conversion?
If you have the slightest worry about sequence of events wait a month or more. It really doesn't matter. If you wait weeks/months and then you convert it all, you will either, (1) owe some small sum in tax on gains at the conversion, or (2) if there was a loss you will convert less than your basis so the small remainder gets carried forward to next year on the 8606 form.
IMO, either of these things are trivial consequences.
JW
IMO, either of these things are trivial consequences.
JW
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Re: Backdoor Roth: How Long To Wait For Conversion?
I do it the next day. Do you really think 3 business days will give you additional safety?
Re: Backdoor Roth: How Long To Wait For Conversion?
I wait at least a month, sometimes several of I am waiting to sell on a dip.
I freely admit that there is a de minimis risk the IRS will start enforcing step transaction doctrine retroactively against individuals. That said, I like having a month because that's how long the IRS says to wait to avoid a wash sale so it seems like a good benchmark for separating the transaction into two parts.
(I have a lot of respect for emergdoc but I don't think the question of whether you ultimately intended to convert is as central to the step transaction doctrine as that discussion suggests; on the other hand I think in a practical sense it's not worth debating or worrying about.)
I freely admit that there is a de minimis risk the IRS will start enforcing step transaction doctrine retroactively against individuals. That said, I like having a month because that's how long the IRS says to wait to avoid a wash sale so it seems like a good benchmark for separating the transaction into two parts.
(I have a lot of respect for emergdoc but I don't think the question of whether you ultimately intended to convert is as central to the step transaction doctrine as that discussion suggests; on the other hand I think in a practical sense it's not worth debating or worrying about.)
Re: Backdoor Roth: How Long To Wait For Conversion?
The government can always decide at any point that the backdoor roth is not legal. Waiting a day, a week, even a year might not completely absolve you if the irs decides that you are violating the step transaction doctrine. It has been 5 years and no one has been audited and told they couldn't do the backdoor roth. So as they say, you pays your money and takes your chance. For now it is legal, and it is up to you to decide if you really want to wait that year and pay the small amount of taxes on any gains vs doing it in a couple days. I did it as soon as the money was available to transfer before I retired. If you do a backdoor roth every year for many years, but wait a year each time, how is that not showing intent to do a backdoor roth all along?
Mike
Mike
Re: Backdoor Roth: How Long To Wait For Conversion?
No, not really. I just wanted to define a rule to go by.barnaclebob wrote:I do it the next day. Do you really think 3 business days will give you additional safety?
Even a stopped clock is right twice a day.
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Re: Backdoor Roth: How Long To Wait For Conversion?
I wait one day. This is clearly a permitted move. I don't feel any anxiety about it at all.
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Re: Backdoor Roth: How Long To Wait For Conversion?
i do not wait. i queue up the money before the first of the year to avoid the delay between my bank and my ira custodian. i contribute to the traditional ira on the first trading day of the year. i convert to roth the second trading day of the year.
i'm surprised at how many people mentioned trying to time the market in their answer!
i'm surprised at how many people mentioned trying to time the market in their answer!
Re: Backdoor Roth: How Long To Wait For Conversion?
Same here.letsgobobby wrote:I wait one day. This is clearly a permitted move. I don't feel any anxiety about it at all.
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Re: Backdoor Roth: How Long To Wait For Conversion?
Roughly 20 seconds, or the time it takes me to click the buttons (vanguard regular backdoor) or make the ph e call (fidelity mega backdoor)
You can do anything you want in life. The rub is that there are consequences.
Re: Backdoor Roth: How Long To Wait For Conversion?
1 or 2 days.
Re: Backdoor Roth: How Long To Wait For Conversion?
I wait until the money posts in my tIRA and then I transfer it that day or as soon as I can access a secure computer. I travel a lot for work and I don't like to do financial transactions over hotel networks, so if I am not home when the money posts in the tIRA I might get delayed transferring it for a couple of days. I don't see any point in artificially waiting for a set number of days to go by.
Re: Backdoor Roth: How Long To Wait For Conversion?
Thanks all for the helpful replies. One more question related to conversion. Does it matter that the money in Traditional IRA is invested in some fund? Eg: One transfer the money from his saving account to traditional IRA account. Once the money is posted, let it sit for a couple of days and then convert to Roth.
Also, do we have to keep some documents related to the transaction for the tax returns?
Thanks!
Also, do we have to keep some documents related to the transaction for the tax returns?
Thanks!
Re: Backdoor Roth: How Long To Wait For Conversion?
If the money is in some kind of investment, it can gain or lose value before it gets converted. A small gain in value is not a big problem - you just pay tax on the gain. A loss is more of a paperwork issue because you are left with some unused basis that you have to keep up with from year to year.vikings wrote:Thanks all for the helpful replies. One more question related to conversion. Does it matter that the money in Traditional IRA is invested in some fund? Eg: One transfer the money from his saving account to traditional IRA account. Once the money is posted, let it sit for a couple of days and then convert to Roth.
Also, do we have to keep some documents related to the transaction for the tax returns?
Thanks!
Yes, there is paperwork and you should understand it before you even consider using the back door. Lots of people mess this up and it is time consuming and frustrating to get it straight. Suggest you watch over the next 4 months for all the "how do I fix this back door problem" threads. It might save you some aggravation. Also download some Forms 8606 and work through it in pencil. If you can't get it to come out right, don't do the back door.
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Re: Backdoor Roth: How Long To Wait For Conversion?
+1. Soon as the money transfer clears.Bracket wrote:1 or 2 days.
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Re: Backdoor Roth: How Long To Wait For Conversion?
ASAP. Keeps it simple. Show me one instance of the "step doctrine" ever coming back to bite someone after a backdoor Roth conversion and I'll let the money simmer in my tIRA a little longer. But there's no real (codified in law) legal difference between waiting one day and one month.
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Re: Backdoor Roth: How Long To Wait For Conversion?
I convert the next day. I haven't heard of anyone having issues doing so.
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Re: Backdoor Roth: How Long To Wait For Conversion?
I convert the next day. I'm skeptical that waiting any length of time will protect you from the step transaction doctrine should the IRS decide that backdoor Roth IRA contributions are not allowed.
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Re: Backdoor Roth: How Long To Wait For Conversion?
It's not the IRS, it's Congress that determines if backdoor Roths are permissible or not.Biglaw Investor wrote:I convert the next day. I'm skeptical that waiting any length of time will protect you from the step transaction doctrine should the IRS decide that backdoor Roth IRA contributions are not allowed.
If law is enacted making them not permissible, the IRS will be on top of it going forward...
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Re: Backdoor Roth: How Long To Wait For Conversion?
That's the point of the conversation though. It's not a law that makes the Backdoor Roth IRA not permissible. Non-deductible contributions are allowed. Conversions are allowed. People are worried that the IRS would initiate a challenge against an individual taxpayer seeking to invalidate such taxpayer's Backdoor Roth contribution. To support this position, the IRS would point to the step transaction doctrine to convince a tax court to collapse the series of steps into a single transaction, given that such single transaction is not permitted by law. I've never heard of this happening.The Wizard wrote:It's not the IRS, it's Congress that determines if backdoor Roths are permissible or not.Biglaw Investor wrote:I convert the next day. I'm skeptical that waiting any length of time will protect you from the step transaction doctrine should the IRS decide that backdoor Roth IRA contributions are not allowed.
If law is enacted making them not permissible, the IRS will be on top of it going forward...
Re: Backdoor Roth: How Long To Wait For Conversion?
I'm a little late to the party, but I just learned about the Backdoor Roth and want to take advantage of it asap. This thread has been helpful, so first off thanks for everyone's prior input. I have a somewhat related question on timing.
Since Roth IRA contributions have to be established by the tax-filing deadline (April 15, 2018 for the 2017 tax year), am I able to effectuate a Backdoor Roth right now for the 2017 tax year, and then as another commenter posted above, do it again during the first trading days of 2018 (and establish a yearly cycle)? Or would I have to wait until after the tax-filing deadline? I do not currently have an IRA, just a 401K.
Thanks in advance for any input!
Since Roth IRA contributions have to be established by the tax-filing deadline (April 15, 2018 for the 2017 tax year), am I able to effectuate a Backdoor Roth right now for the 2017 tax year, and then as another commenter posted above, do it again during the first trading days of 2018 (and establish a yearly cycle)? Or would I have to wait until after the tax-filing deadline? I do not currently have an IRA, just a 401K.
Thanks in advance for any input!
Re: Backdoor Roth: How Long To Wait For Conversion?
Deamon615, welcome to the forum.
Yes. But to be specific, you'll be making a TIRA contribution, not a Roth IRA contribution. The deadline is the same either way.Deamon615 wrote:Since Roth IRA contributions have to be established by the tax-filing deadline (April 15, 2018 for the 2017 tax year), am I able to effectuate a Backdoor Roth right now for the 2017 tax year, and then as another commenter posted above, do it again during the first trading days of 2018 (and establish a yearly cycle)?
You do not have to wait until after the tax-filing deadline. You can set it up for January 2nd.Or would I have to wait until after the tax-filing deadline?
Re: Backdoor Roth: How Long To Wait For Conversion?
In fact, it is better (easier to understand the paperwork) to do the two steps in one calendar year. This puts the contribution on the front side of Form 8606 and the conversion on the back side of the same form.
I'd suggest you download and pencil through form 8606 before trying this. The steps to do the back door are easy - few clicks of the mouse. The paperwork and accidentally having another IRA are the things that people mess up on. If you can't figure out the paperwork by hand, do not do the back door and don't expect a tax-preparer to be able to help.
I'd suggest you download and pencil through form 8606 before trying this. The steps to do the back door are easy - few clicks of the mouse. The paperwork and accidentally having another IRA are the things that people mess up on. If you can't figure out the paperwork by hand, do not do the back door and don't expect a tax-preparer to be able to help.
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Re: Backdoor Roth: How Long To Wait For Conversion?
Does this change if conversion fees are involved? Fidelity is charging $15 for after-tax 401K conversion to RothIRA. So $390 in fees if doing immediately for bi-monthly paycheck, but half for each double delay (12 months - $180, 6 months $90, etc.). Unfortunately, no way to split contribution investments for asset allocation.
By the looks of it, $390 in fees would be small in terms of overall potential Roth growth, but best strategy to compare income taxes to potential after-tax gains for reduced costs?
By the looks of it, $390 in fees would be small in terms of overall potential Roth growth, but best strategy to compare income taxes to potential after-tax gains for reduced costs?
Re: Backdoor Roth: How Long To Wait For Conversion?
What you are doing is not a "back door Roth" which is what this thread is about. What you are doing goes by the name of "mega back door Roth" instead. They are similar, but not the same.roamin survivor wrote: ↑Mon Nov 13, 2017 1:11 pm Does this change if conversion fees are involved? Fidelity is charging $15 for after-tax 401K conversion to RothIRA. So $390 in fees if doing immediately for bi-monthly paycheck, but half for each double delay (12 months - $180, 6 months $90, etc.). Unfortunately, no way to split contribution investments for asset allocation.
By the looks of it, $390 in fees would be small in terms of overall potential Roth growth, but best strategy to compare income taxes to potential after-tax gains for reduced costs?
There is no reason to roll your after-tax account more than once or twice a year. In fact, with a fee, I'd probably do it once a year.
Yes, if you roll the earnings (which are pre-tax) into the Roth IRA, you may pay some tax on that. But wouldn't you rather pay tax on earnings than pay $390 a year in fees?
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Re: Backdoor Roth: How Long To Wait For Conversion?
$390? Yuck! I'd still do it, but yuck.roamin survivor wrote:Does this change if conversion fees are involved? Fidelity is charging $15 for after-tax 401K conversion to RothIRA. So $390 in fees if doing immediately for bi-monthly paycheck, but half for each double delay (12 months - $180, 6 months $90, etc.).
Does this mean you have to contribute after-tax each pay period? You can't only do it once a month or even once a quarter? Or does this mean whatever your AA is in your pre-tax sub-account has to be the same in after-tax sub-account?Unfortunately, no way to split contribution investments for asset allocation.
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Re: Backdoor Roth: How Long To Wait For Conversion?
Gotcha, but yeah, it's just a concern about tax rates and assuming a 35% income tax rate and 5% return, estimating to come out equal to doing the rollover once a year. Maybe do two if it's doing explosively well.
The latter. For some reason, they bulk it all together so doing a 60-40 split will result in both the pre-tax and after-tax pots being split 60-40 each.Duckie wrote: ↑Mon Nov 13, 2017 2:25 pmDoes this mean you have to contribute after-tax each pay period? You can't only do it once a month or even once a quarter? Or does this mean whatever your AA is in your pre-tax sub-account has to be the same in after-tax sub-account?Unfortunately, no way to split contribution investments for asset allocation.
Re: Backdoor Roth: How Long To Wait For Conversion?
Well "equal" is not really "equal" if one represents tax on money you get to keep. The fees just go away with nothing to show for it.roamin survivor wrote: ↑Mon Nov 13, 2017 3:43 pm Gotcha, but yeah, it's just a concern about tax rates and assuming a 35% income tax rate and 5% return, estimating to come out equal to doing the rollover once a year. Maybe do two if it's doing explosively well.
You are allowed to roll your pre-tax money into tIRA and the after-tax money into Roth IRA if you want. Some people do not find this helpful because they are also doing the ordinary back door. Others what are also doing the ordinary back door will roll that tIRA back into the 401k before the end of the year.
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Re: Backdoor Roth: How Long To Wait For Conversion?
Same here.letsgobobby wrote: ↑Fri Aug 14, 2015 9:56 pm I wait one day. This is clearly a permitted move. I don't feel any anxiety about it at all.
Re: Backdoor Roth: How Long To Wait For Conversion?
Just out of curiosity.. I did a backdoor Roth IRA with Vanguard in the beginning of 2017 and put money in the Vanguard Federal Money Market Fund in a Traditional IRA and then converted the next day to my Roth IRA. Looking back at the transaction history as I read through this thread, upon conversion it looks like there was a $0.14 dividend paid on my money in the Federal Money Market Fund upon conversion.
1) Since I contributed "only" $5500 to the Traditional IRA prior to conversion I'm technically still not going over the contribution limit, correct?
2) I'm assuming the IRS rounds to the nearest dollar based on what I've seen on the tax prep software I've used in the past, so $0.14 shouldn't make any difference at all, correct?
Thanks!
For what its worth since this was a poll - I just put $5500 in my traditional IRA today and I plan to convert TOMORROW
1) Since I contributed "only" $5500 to the Traditional IRA prior to conversion I'm technically still not going over the contribution limit, correct?
2) I'm assuming the IRS rounds to the nearest dollar based on what I've seen on the tax prep software I've used in the past, so $0.14 shouldn't make any difference at all, correct?
Thanks!
For what its worth since this was a poll - I just put $5500 in my traditional IRA today and I plan to convert TOMORROW
Re: Backdoor Roth: How Long To Wait For Conversion?
Correct.kjdbonez wrote:Since I contributed "only" $5500 to the Traditional IRA prior to conversion I'm technically still not going over the contribution limit, correct?
Correct.I'm assuming the IRS rounds to the nearest dollar based on what I've seen on the tax prep software I've used in the past, so $0.14 shouldn't make any difference at all, correct?
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Re: Backdoor Roth: How Long To Wait For Conversion?
We do it the next day.
We have been audited.
Clean bill of health.
YMMV.
We have been audited.
Clean bill of health.
YMMV.
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Re: Backdoor Roth: How Long To Wait For Conversion?
You can do it right away, but call Vanguard.
Re: Backdoor Roth: How Long To Wait For Conversion?
Not disagreeing, but just for clarity there is no $ limit on conversions -- if you had an IRA worth $50k you could put it all in a Roth (there is a limit on contributions but the whole theory of the backdoor Roth is that the money you put into the Roth is via conversion not contribution).Duckie wrote: ↑Fri Jan 05, 2018 7:01 pmCorrect.kjdbonez wrote:Since I contributed "only" $5500 to the Traditional IRA prior to conversion I'm technically still not going over the contribution limit, correct?
Correct.I'm assuming the IRS rounds to the nearest dollar based on what I've seen on the tax prep software I've used in the past, so $0.14 shouldn't make any difference at all, correct?
I still tend to wait 30 days but I freely admit at a practical level it seems unnecessary.
Re: Backdoor Roth: How Long To Wait For Conversion?
Why do you call vanguard as opposed to just doing it on their website?
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Re: Backdoor Roth: How Long To Wait For Conversion?
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Re: Backdoor Roth: How Long To Wait For Conversion?
Not wanting to hijack this thread about Mega Backdoor Roth issues, but...
A close approximation to breakeven is probably when earnings are > (rollover fee * 2 / marginal tax rate). It would probably be best to rollover at or some factor above breakeven to reduce the hassle factor.
A fixed period between rollovers is probably not optimum. The fee is fixed, but the taxable earnings are subject to (contribution amount * return). Someone with higher contribution amounts would benefit from more frequent rollovers. Years with higher returns such as 2017 would also benefit from more frequent rollovers.roamin survivor wrote: ↑Mon Nov 13, 2017 1:11 pm Does this change if conversion fees are involved? Fidelity is charging $15 for after-tax 401K conversion to RothIRA. So $390 in fees if doing immediately for bi-monthly paycheck, but half for each double delay (12 months - $180, 6 months $90, etc.). Unfortunately, no way to split contribution investments for asset allocation.
By the looks of it, $390 in fees would be small in terms of overall potential Roth growth, but best strategy to compare income taxes to potential after-tax gains for reduced costs?
A close approximation to breakeven is probably when earnings are > (rollover fee * 2 / marginal tax rate). It would probably be best to rollover at or some factor above breakeven to reduce the hassle factor.
Re: Backdoor Roth: How Long To Wait For Conversion?
I just can not imagine with probably 1 million + people doing back-door Roths, it being allowed on all trading platforms that I know of, thousands of posts and articles about it, etc., that the IRS would one day just start auditing people and dis-allowing them retroactively.
IF they want to stop them, I'd imagine they'd release something to say "from this date forward..." As of now, it's well-known, and legal.
And even IF they DO retroactively try to invalidate them, if you do them every single year (whether after 1 day, 1 week, 1 month, or 1 year), that will clearly show the intent and pattern anyway.
I'd rather do it right away and get it over with, not forget, and not have any taxable gains to complicate things.
IF they want to stop them, I'd imagine they'd release something to say "from this date forward..." As of now, it's well-known, and legal.
And even IF they DO retroactively try to invalidate them, if you do them every single year (whether after 1 day, 1 week, 1 month, or 1 year), that will clearly show the intent and pattern anyway.
I'd rather do it right away and get it over with, not forget, and not have any taxable gains to complicate things.
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Re: Backdoor Roth: How Long To Wait For Conversion?
My view is that the IRS is aware of the backdoor and is not terribly happy about it. The previous administration tried to float changes to the tax code to close it. That tells me that the IRS doesn't think there is a way under the current laws to restrict it. The current administration seems to have no interest in changing the law, in fact just did a major tax law revision without (to my recollection) ever discussing that.
I wouldn't worry about it, but I never had to do it.
I wouldn't worry about it, but I never had to do it.
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Re: Backdoor Roth: How Long To Wait For Conversion?
The optimum is to roll over each time the total value of the 401(k) exceeds a threshold. The cost of delaying conversion till the next periodic contribution is the tax on the next periods earnings. The expected value of that only depends on the value of the 401(k), the expected return and the tax rate. The last two can be treated as constants (unless they change!).Spirit Rider wrote: ↑Sat Jan 06, 2018 11:47 am A fixed period between rollovers is probably not optimum.
Re: Backdoor Roth: How Long To Wait For Conversion?
This might be a stupid question, but are you basically talking about doing in-service 401k rollover to Roth IRA?Spirit Rider wrote: ↑Sat Jan 06, 2018 11:47 am Not wanting to hijack this thread about Mega Backdoor Roth issues, but...
A fixed period between rollovers is probably not optimum. The fee is fixed, but the taxable earnings are subject to (contribution amount * return). Someone with higher contribution amounts would benefit from more frequent rollovers. Years with higher returns such as 2017 would also benefit from more frequent rollovers.roamin survivor wrote: ↑Mon Nov 13, 2017 1:11 pm Does this change if conversion fees are involved? Fidelity is charging $15 for after-tax 401K conversion to RothIRA. So $390 in fees if doing immediately for bi-monthly paycheck, but half for each double delay (12 months - $180, 6 months $90, etc.). Unfortunately, no way to split contribution investments for asset allocation.
By the looks of it, $390 in fees would be small in terms of overall potential Roth growth, but best strategy to compare income taxes to potential after-tax gains for reduced costs?
A close approximation to breakeven is probably when earnings are > (rollover fee * 2 / marginal tax rate). It would probably be best to rollover at or some factor above breakeven to reduce the hassle factor.
Is this what one does when they don't have the ability to make Roth 401k contributions in a plan with acceptable investment options? Otherwise is there any other advantage? If you think you're going to be in higher tax bracket upon retirement??
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Re: Backdoor Roth: How Long To Wait For Conversion?
This is sidetracking this thread, but yes we are talking about in-service rollovers of "employee after-tax" (non-Roth) contributions and earnings.
Depending on the employer, employee after-tax contributions can be in addition to or instead of employee deferrals.Is this what one does when they don't have the ability to make Roth 401k contributions in a plan with acceptable investment options? Otherwise is there any other advantage? If you think you're going to be in higher tax bracket upon retirement??
Most people using this capability are maximizing their traditional (pre-tax) employee deferrals and using after-tax contributions and in-service rollovers to make additional tax-advantaged contributions.
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Re: Backdoor Roth: How Long To Wait For Conversion?
Not usually. If a plan offers Roth conversions it almost certainly offers Roth contributions. The usual option we're discussing is the so-called Mega Backdoor Roth, where after-tax (non-Roth) contributions in addition to the usual contributions are made and rolled over to either a Roth IRA or Roth 401(k).kjdbonez wrote: ↑Sat Jan 06, 2018 8:01 pm This might be a stupid question, but are you basically talking about doing in-service 401k rollover to Roth IRA?
Is this what one does when they don't have the ability to make Roth 401k contributions in a plan with acceptable investment options? Otherwise is there any other advantage? If you think you're going to be in higher tax bracket upon retirement??
Re: Backdoor Roth: How Long To Wait For Conversion?
I tried to do the conversion as soon as I can. I like Fidelity because I can do the conversion online myself. I hate to have 8 cents in my tIRA for a year (I had to call for the conversion with Merrill Edge).
I was not worried about it. I am not the only one who did this. Waiting 1 or 30 or 365 days does not make much difference (to me).
I was not worried about it. I am not the only one who did this. Waiting 1 or 30 or 365 days does not make much difference (to me).
Re: Backdoor Roth: How Long To Wait For Conversion?
It’s not clear to me that the IRS even is focused on backdoor IRAs. Because there is no box on your tax return that says “backdoor ROTH IRA”. It appears as two separate transactions. A normal contribution to a traditional IRA. And a normal conversion from a tIRA to a Roth IRA. In fact, that’s why it’s legal...because it’s technically two separate, allowable things. Particularly after this last round of tax changes where they could easily have passed a law requiring a certain time before conversions are allowed. Or outlawed them altogether, like it used to be for high income folks. But there were no changes in this areaEarl Lemongrab wrote: ↑Sat Jan 06, 2018 1:29 pm My view is that the IRS is aware of the backdoor and is not terribly happy about it. The previous administration tried to float changes to the tax code to close it. That tells me that the IRS doesn't think there is a way under the current laws to restrict it. The current administration seems to have no interest in changing the law, in fact just did a major tax law revision without (to my recollection) ever discussing that.
I wouldn't worry about it, but I never had to do it.
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