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  • Backdoor Roth Question

    I'm looking to set up a backdoor roth through Vanguard. I read the posted tutorial and proceeded to follow the directions accordingly. I was intending on setting up a traditional IRA, a Roth IRA, making my contribution to the traditional, and then making the conversion to the Roth. In setting up the Roth IRA, it requires a contribution be made into the account. However, I'm disqualified from direct Roth contributions based upon my salary. So, do I contribute the smallest amount necessary to open the account (it's like $1) or is there something else I'm missing here?

  • #2
    You do not need to set up the Roth IRA until you are ready to convert your TIRA into it. That will be the contribution to open it. After that, keep the TIRA open with whatever minimum is required for the contributions to flow through every year.
    Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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    • #3
      My institution closed my TIRA when I rolled my $5500 in this year (first year we had to backdoor).  Is there a way I can just tell them not to do that?  Seems lousy to open a new account every year.

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      • #4




        My institution closed my TIRA when I rolled my $5500 in this year (first year we had to backdoor).  Is there a way I can just tell them not to do that?  Seems lousy to open a new account every year.
        Click to expand...


        Yeah, that's no fun. it depends on the minimum balance rules for your custodian. Find out what you have to leave in the account for it to remain open. If the threshold is too high, you'll have to decide whether you want to go through setting up a new account every year or take your business elsewhere.
        Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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        • #5
          My wife and I are in the process of setting up Roth IRAs. She already has a TIRA with around 10k into which she is transferring ~30k from an old 403b (since we're having a child and she's no longer working and doesn't want to withdraw the money) prior to moving it all into a new Roth IRA. I'm also creating and funding a new Roth IRA via backdoor.

          The WCI backdoor Roth IRA tutorial suggests the following:

          "Get rid of any SEP-IRA, SIMPLE IRA, traditional IRA, or rollover IRA money.  The total sum of these accounts on December 31st of the year in which you [transfer funds from the TIRA to the Roth] must be zero to avoid a “pro-rata” calculation that can eliminate most of the benefit of a Backdoor Roth IRA."

          I have looked up this pro-rata topic in some detail and have spoken with multiple individuals with Fidelity, where we have most of our accounts, and no one seems to think this is an issue, i.e. I am told that having funds in TIRAs and Roth IRAs simultaneously will not eliminate any benefit.

          Our TIRAs require a minimal balance of one hundred dollars, so I'm a little concerned about the meaning of the above warning.

          Please clarify at your convenience.

          Thanks!

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          • #6
            You will have to pay taxes if you have a balance in TIRA. Are you ok with the taxes you'll end up paying? Any way for spouse to roll everything into a current 403b/401k (if available)?

            Right now my TIRA = 0. I actually just funded my Roth IRA for 2016 today (a bit late I know). Once the funds hit, I literally click the "convert to Roth IRA" button. Then buy whatever funds I want in my Roth IRA account. This is with Vanguard btw. Then TIRA goes back to 0.

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            • #7
              Because of your joint income bracket, your wife will not qualify to convert to a backdoor Roth w/o paying income taxes. The good folks at Fidelity are probably not privy to your income tax return and may not even be aware of the backdoor conversion technique. You should be discussing this with your CPA or just follow the advice on WCI.

              A "TIRA" is either pre-tax or nondeductible based upon your MAGI (for your purposes) so, no, having funds in TIRAs and Roths simultaneously will not eliminate any benefit. It is when you convert the money in a TIRA to a Roth that will cause you to owe taxes on the conversion - IF you have existing pre-tax TIRAs. Of course, if you are converting a pre-tax TIRA to a Roth, you will always owe taxes unless you plan well.

              In your wife's situation, she might want to:

              1. Convert the $10k pre-tax (my assumption) TIRA this year or next (next year if your tax bracket will drop) and

              2. Leave the 401k $ behind for now.


              After converting the $10k TIRA, can do tax-free backdoor Roth conversions.
              Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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