January 24, 2021 Categories:

Because much of my income is commission, I don’t know exactly how much I will make this year. I’ve done both in the past. Tax-deferred money is taxed when withdrawn from a tax-deferred IRA (or 401(k), 457(b), etc…. You’ll owe tax on a prorated basis based on the balance of any IRA (includinga a SEP IRA) if you attempt the backdoor Roth. – Is rolling the traditional IRA to a Roth an option if I already rolled over $6000 through the backdoor? You want to convert your 2021 contribution, so select that in the upper left. seems like i first open a traditional ira account for each of us and contribute there first then do back door roth conversion for both, is this correct? I don’t plan on contributing to my SEP for 2018. We definitely don’t qualify for a traditional ROTH account. I opened a Traditional IRA in November 2019 and contributed $6000 the same month. The only advantage of a SEP over a 401(k) that I can think of is the fact that you can open it for the prior calendar year prior to April 15th, whereas a solo 401(k) has to be open by the end of the calendar year if you plan to contribute for that year. I chose E*trade due to its flexibility and access to great funds including many Vanguard and Schwab funds. By bunching deductions year over year and timely donations to your DAF, you can have the best of all worlds. It was a new IRA acccount create just for the conversion, so that may have had something to do with the delay. Is your accountant a CPA? My spouse and I began this process for our 2017 IRAs yesterday on 1/20/2018 when we initiated a transfer from our back into a traditional IRA. And congrats on your successes with the conversion! He is right: https://www.irs.gov/retirement-plans/ira-faqs-recharacterization-of-ira-contributions. Two questions for you – I have money in an IRA that I converted from a 401k a while back. It … Vanguard as a company most definitely does not suck, but their individual 401(k) leaves a lot to be desired. Is this possible with Amazons plan? If I contribute all my income to a mega backdoor roth, does that reduce my MAGI? Are there any special considerations when I do my taxes with turbotax given that my 2019 traditional IRA contribution happened in a different year from when I converted it to the backdoor roth IRA in Jan 2020? I've been doing it since 2014 and haven't been audited yet, despite having several things that add way more complication than the mega backdoor Roth. For rollover to the employer 401k, the process is easy. I did write the post (I just couldn’t let all my screenshots go to waste). A modified adjusted gross income (MAGI) of $208,000 for a couple filing jointly, or $140,000 for an individual makes you ineligible to contribute to a Roth IRA in 2021. So, if I set up an account, made 2016 and 2017 contributions, then that would cover $11k of it. FYI, I think there’s a slight error in the following paragraph: Note: if you’ve never done the Backdoor Roth, and you’re financially able, now is a great time to make one contribution for 2018 and another for 2019. Thank you. If you want to be invested over the time it takes to accumulate $6,000 (which should be much less than 12 months), you can invest in a taxable brokerage account. However, with the Mega Backdoor Roth, you can save up to $62,000 in a Roth in 2019! I agree simple “all at once” is much better but is it permissible to do in two halves? When I click on the links, it shows the 6k went over for 2019. Any help on this is greatly appreciated! Even if you put the contributions on auto-pilot and only do the conversion at the end of the year, you’re still overcomplicating things (not to mention creating some tax drag.) This theoretical concern was put to rest with footnotes 268, 269, 276 and 277 of the Conference Committee’s explanatory report on the Tax Cuts and Jobs Act that provided clarity and validated the backdoor Roth IRA contribution. I have been doing more research and this really does make sense for me but I have some specifics I was hoping someone might help advise me on. You should have ’til the end of the calendar year to get it right, so no hurry. Would we still be able to do the back door Roth for the remaining contribution amount ? John, i’m about 98% sure that’s correct. If he has 1099 income from your business or any other, he can open his own solo 401(k) (a.k.a. If not, you could start a solo 401(k) based on a tiny amount of income earned as an independent contractor. If only I could get to this page BEFORE submitting. I don’t believe I can roll over HIS SIMPLE-IRA funds to MY 401k. have been nullified. Now I do so with zero concerns about the step doctrine. As long as you assigned the contributions to the correct years (one $5,500 sum in 2017 and another in 2018), you’re fine. So it appears that it is only important to select the year correctly when contributing to TIRA (and Vanguard won’t let you over contribute), but when you convert to a Roth there is no year to select…conversions occur in the year they occur. We normally use Turbo Tax, and I just imagine what kind of conversation I’m going to have with my tax lady (the wife) when she sits down to do everything. In order to start doing the back-door Roth conversions, I first need to convert $36k I have sitting in my traditional IRA today of which all the contributions were non-deductible but has about $8k in gains. It may be that we both have brokerage accounts for the traditional IRA and “mutual fund” accounts for the Roth IRA. (b) I followed vanguard recommendations of directly converting IRA to roth (without creating new roth account). I have also set up a separate Roth IRA. Only dumb people. . I am in the process of moving traditional IRA pre-tax funds into my 401k in order to setup for doing backdoor Roth. 1. fund the $6000 in the traditional IRA’s money market account The Taxes on Passive Income Streams – Collecting FI/RE Wisdom, 6 Causes Why Early Retirement Will Destroy Your Life - Trader Sensation, Top 5 Financial Priorities for an Early Career Physician – Collecting FI/RE Wisdom, Asset Allocation (Part 2): The Risk / Growth Bucket – Collecting FI/RE Wisdom, The 7 Best Ways to Invest $1,000 (& Beyond) | Money Life Wax, The IRA- A Retirement Account For (Almost) Everyone - Richer Life DVM, 5 Reasons Your Doctor Has a Side Hustle - Bella Wanana, 5 Reasons Your Doctor Has a Side Hustle | Money Life Wax, Zone of Proximal Development: How the FI Community Matters and Misses | Educator FI, 5 Things You Can Do With an Old 401(k) – Collecting FI/RE Wisdom, The Backdoor Roth: Investing in a Roth IRA for High Earners – Hopscotch, How to Invest in Your 401k, IRA and HSA to Save Money n Taxes – isaugatthis. 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