Vanguard Backdoor - Wait till settlement?

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fuzzball
Posts: 37
Joined: Tue Jul 19, 2016 5:52 pm

Vanguard Backdoor - Wait till settlement?

Post by fuzzball » Fri Dec 07, 2018 11:22 am

Some background - This is my first year doing a Backdoor Roth Conversion. I read through a couple of guides POF/WCI etc.

My current situation seems simple - I only have a Roth IRA via Vanguard, no traditional IRA prior to this. Rest of my retirement sits in a HSA/401/457/403 accounts.

I opened up a new tIRA account on Vanguard on 12/6 - once confirmed open, I made $5500 contribution to the VMFXX (Vanguard Fed Money Market Fund). Called Vanguard and was told that the funds won't settle until 12/14. As of now, my holding is listed as "0" but the credit reflects the correct amount.

I just want to confirm that VMFXX is still technically a mutual fund that I can convert from or do I need to buy some mutual funds that are stocks/bonds etc?

Most guides say that waiting 1-2 days would suffice in most cases. Vanguard told me to wait until 12/14. What does Boglehead say to this?


Thanks!

MotoTrojan
Posts: 2603
Joined: Wed Feb 01, 2017 8:39 pm

Re: Vanguard Backdoor - Wait till settlement?

Post by MotoTrojan » Fri Dec 07, 2018 11:26 am

You may need to let it settle but it doesn’t need to be a MF to convert. You can recharacterize or convert any holdings, including ETFs.

Nthomas
Posts: 122
Joined: Fri Jul 15, 2016 8:46 am

Re: Vanguard Backdoor - Wait till settlement?

Post by Nthomas » Fri Dec 07, 2018 9:32 pm

The MMf is probably safest. If you invest it in an ETF, for example, you need to pay taxes on any gains prior to the conversion. Although likely small, it would complicate matters a bit.

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