Backdoor Roth Question

[jsr52]

I anticipate making an AGI for the 2017 tax year of ~130,000 (I am single). If I want to contribute to a traditional IRA and then convert to my current ROTH-IRA account, should I just open a traditional account, and can I then make monthly deposits and convert it to my current ROTH account sometime around Jan or Feb 2018?

[jsr52]

Also, this would all be after maxing may work 403B which is ROTH

[DMFA]

jsr52 wrote:

I anticipate making an AGI for the 2017 tax year of ~130,000 (I am single). If I want to contribute to a traditional IRA and then convert to my current ROTH-IRA account, should I just open a traditional account, and can I then make monthly deposits and convert it to my current ROTH account sometime around Jan or Feb 2018?

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I think this would be easier to answer if you'd tell us what you're trying to do. I don't understand the point of what you're outlining. Why wouldn't you convert before year's end? Why would you deduct this year but pay taxes next year?

[Peds]

depending on your marginal tax rate including state, roth 403b might not be as desirable.

its easier to lump sum a tIRA, then convert all at once BOTH in the year 2017. so yes, open a new tIRA, put in 5500, then convert to your existing rIRA.

[jsr52]

In response to DMFA, I am trying to put the 18,000 limit into my ROTH-403B, then my question is what to do next. It seems like if you put 5500 in a traditional IRA in Jan 2018, then convert to ROTH-IRA you are losing out on having put the 5500 in earlier in the year and having it grow alittle bit....

[DMFA]

jsr52 wrote:

In response to DMFA, I am trying to put the 18,000 limit into my ROTH-403B, then my question is what to do next. It seems like if you put 5500 in a traditional IRA in Jan 2018, then convert to ROTH-IRA you are losing out on having put the 5500 in earlier in the year and having it grow alittle bit….

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Just convert in late December, don't deduct it your contributions, and pay taxes on the gain when you convert, if that's what you're concerned about. You can also contribute, convert, contribute, convert, lather, rinse, repeat. Just bear in mind a lot of the funds you'd want to buy have $2,500 minima.

As long as you have zero on 12/31 the year you convert, your non-deductible TIRA contributions won't get double-taxed on the pro-rata rule. The end-of-year basis won't really end up making a difference, I suppose. If you don't get your full $5,500 in before the end of the year, it'll be okay, you can fill that in before you do your taxes.

In addition, you would do well to save up for the next year's IRA contribution for early January the prior year if you're able. For instance, try to sock away $500/month in 2017 to make your 2018 contribution in early January. That can be kinda tough to do.

...basically it doesn't make too much of a difference. You won't earn much on what you've got to create too much tax. Your strategy is fine, I'd just prefer to convert in late December to have a 5498 with $0 on 12/31, a 1099-R with the distribution, and your form 8606 with the conversion so the taxes are a bit more straightforward to do...but that's paralysis by analysis.

[jsr52]

Starting to make more sense DMFA thanks. Basically just to simply, for the 2017 TAX season, assuming I max my ROTH403B, I would make a traditional IRA contribution sometime in December, then convert to my ROTH-IRA before Jan 2018?