New to backdoor Roth - timing for 2024

[swampbanker]

Bogleheads - new member and incredibly happy to be a part of this forum. This is the first year my wife and I have MAGI above the limits for a traditional Roth IRA contribution. As such, we will be doing the backdoor Roth for the first time. I have a good understanding of the process (thanks to this forum) however I am still a little unclear with respect to the timing of it all. Here are the steps I am planning to take, would welcome any feedback:

• Initiated the process of moving each of our Rollover IRAs (pre-tax contributions) into our 401(k) plans at work - expected to be done by 12/31 however I'm aware of the need for there to be $0 balances in the accounts and the time crunch this late in the year

• We each have Roth IRAs from when we were both able to contribute, for my sanity and sake of simplicity I plan on opening new Traditional IRAs for each of us and contributing the $7k ($14k in total)

• Assuming that the Rollover IRAs have been moved and all looks in good order, my plan was to then convert the Trad IRA to Roth before year end

My question as outlined in the above steps is - does it matter if the Trad IRA contributions of $7k each and then subsequent conversion to Roth IRA are done by 12/31 for the 2024 tax year or do I also have the option to do the contribution and conversion between January 1st and April 15th 2025 ? I've read countless threads on the forum and I'm still not clear. The White Coat Investor articles highlights that he does the conversion to Roth the first week of January each year.

When Should You Contribute and Convert?
You should do both steps as soon as possible. Many white coat investors do the IRA contribution step and the Roth conversion step the first week of January each year. This maximizes the amount of tax-free compounding that can occur on those dollars. Minimizing the time between contribution and conversion and doing both steps within the calendar year is not required, but it certainly simplifies the paperwork.

Any guidance would be appreciated.

[retiredjg]

Welcome to the forum.

It would be best if you do manage to get both the contribution and the conversion done before the end of the year. This makes your paperwork easier because both the contribution and the conversion are handled on the same form and both are handled in one tax year.

As you mentioned, time may be too short and the conversion step may not be completed by the end of the year. That's OK, it just adds a level of complexity. If this does happen....

1. Go ahead and do the contribution in 2024, but do not do the conversion step in 2024. Put the contribution into money market.
2. Document the contribution on your 2024 Form 8606
3. Document the conversion step on your 2025 Form 8606.


All this does is split the reporting into two forms over two consecutive tax years. If you understand the form, this is not difficult.

That is a hint....read the form, fill it out with pencil and play with it until you understand the form...now is better than later. If you understand the form, you can easily recognize if your tax software enters everything correctly.


You do have the option to do both the contribution and the conversion next year before tax day. There is no compelling reason to do this in my opinion, but if you do.....steps 2 and 3 are the same as mentioned above.


Since you have already started the rollovers, chances are there will be enough time and all will go as planned.

[toddthebod]

• Initiated the process of moving each of our Rollover IRAs (pre-tax contributions) into our 401(k) plans at work - expected to be done by 12/31 however I'm aware of the need for there to be $0 balances in the accounts and the time crunch this late in the year

• We each have Roth IRAs from when we were both able to contribute, for my sanity and sake of simplicity I plan on opening new Traditional IRAs for each of us and contributing the $7k ($14k in total)

• Assuming that the Rollover IRAs have been moved and all looks in good order, my plan was to then convert the Trad IRA to Roth before year end

Welcome to the forum. Just so you don't feel rushed, you can make your 2024 contribution until April 15, 2025, in which case if you wanted to convert immediately, you would only need to have your pre-tax traditional IRA rolled over to your 401(k) by 12/31/25. There is no "time crunch."

Don't be afraid of the paperwork. While it is slightly simpler if you contribute and convert in the same year, there are plenty of people on this forum who will walk you through the tax forms telling you the exact figures to put on each line.

[RetiredAL]

Initiated the process of moving each of our Rollover IRAs (pre-tax contributions) into our 401(k) plans at work - expected to be done by 12/31 however I'm aware of the need for there to be $0 balances in the accounts and the time crunch this late in the year[/list]
When Should You Contribute and Convert?
You should do both steps as soon as possible. Many white coat investors do the IRA contribution step and the Roth conversion step the first week of January each year. This maximizes the amount of tax-free compounding that can occur on those dollars. Minimizing the time between contribution and conversion and doing both steps within the calendar year is not required, but it certainly simplifies the paperwork.

Any guidance would be appreciated.

You have until 4/15/25 to contributed for 2024. After Jan 1, be sure it's mark previous (2024) year.

There is nothing wrong with contributing 2024 and 2025 in 2025. Just make them separate transactions.

Conversion timing is independent of contribution year. If you contribute in Jan for 2024 and Feb for 2025, you can convert both together.

If 2024 is made in Jan, just make sure you submit IRS 8606 with your 2024 taxes to document it.

Do be aware that new transferred in money is getting hold delay at both Vanguard and Fidelity. These hold delays prevent you from moving from IRA to Roth until they expire. Hold delays have been around 2 weeks. If a Dec deposit can't be converted until Jan, it's not a big deal.

[swampbanker]

Thank you all - very helpful and this does clarify it for me. Sounds like if it can be done same year that would be "simpler" but not required. Given that the rollovers into the 401(k) are already in flight (and since we've already spoken with the existing providers confirming they can accept, ensuring the direct transfer have the required info on the check to prevent any delays, etc.) I'm hopeful I can complete both contribution and conversion to Roth this year. While both Rollover IRAs are technically showing $0 balances now, I know it's prudent to ensure they clear at the 401(k) providers and get invested again ASAP.

Good to know about the new transferred funds getting hold delays - in lieu of that I'm going to open the 2 Trad IRAs with Vanguard today and fund them in anticipation of being able to do the conversion in December (or in 2025 if needed).

[retiredjg]

Good to know about the new transferred funds getting hold delays - in lieu of that I'm going to open the 2 Trad IRAs with Vanguard today and fund them in anticipation of being able to do the conversion in December (or in 2025 if needed).

This is probably what I would do - put the money into the tIRA now, in the settlement fund. When you get the notice the rollovers have completed, convert the entire thing to Roth. Some tax may be due on the interest that accrues in the meantime.

One further word of caution...if you are depending on a tax-preparer to know how to handle this, they may not. Be sure to tell them you made a non-deductible contribution to tIRA. And that you converted that to Roth a few days later. Then check to be sure they did it right. Some do not.