Backdoor Roth Question

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FS51
Posts: 53
Joined: Thu Sep 11, 2014 11:15 am

Backdoor Roth Question

Post by FS51 »

I know there's 1000 topics on Backdoor Roth IRAs and I've read the WiKi but I have a simple question I'm hoping someone can help me with.

Due to income limitations between me and my spouse, we cannot contribute to Roth IRAs. I currently have a rolled over 401k from a previous employer at Vanguard in a Traditional IRA. I just finished filling out the paperwork to roll that Traditional IRA (rolled over 401k) into my current employer's 401k so as to not have any Traditional IRAs to complicate matters. Both me and my wife have Roth IRAs from before we were phased out income-wise.

Once I've rolled over my Traditional IRA into my current 401k, I should be in a position where I can take advantage of Backdoor Roth IRAs. My question is, does it make sense to contribute on a monthly basis into each account and do the conversion at the end of the year? I know I'll have to pay taxes on any market value increases or income generated but I think putting smaller amounts monthly into each of our traditional IRAs over the course of a year may be easier then trying to lump sum 11k at the end of the year. The alternative would be at the end of the year just decide what a comfortable lump sum figure would be to deposit into each of our tIRAs and then just do the Roth conversion the next day.

I guess my long winded question is, does it make any sense to contribute on a monthly basis to tIRAs for both me and my spouse knowing that we'll be doing a backdoor roth conversion at the end of the year? Or, should I just lump sum it at the end of each year and do an immediate conversion to limit and tax liabilities?

Thanks in advance!
Alan S.
Posts: 10525
Joined: Mon May 16, 2011 6:07 pm
Location: Prescott, AZ

Re: Backdoor Roth Question

Post by Alan S. »

As soon as you have 5500 for the non deductible contribution, I would make that full contribution to EITHER spouse's TIRA and convert it right away. Then as soon as you have another 5500 available make the full contribution for the other spouse and convert. This is a total of 4 transactions per year.

Much more simpler than having to make up to 48 different transactions, which is so many that there would probably be an error or two in the process.
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