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First time Roth (backdoor) question

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  • First time Roth (backdoor) question

    So I have maxed out my 401k and just got a bonus and would like to do a Roth IRA for the first time ever.  I would like to contribute the maximum for a Roth IRA for me and my spouse (via backdoor Roth) but wondered if it would be better to wait until January and do $11000 (for 2017 and 2018 simultaneously) for just me so that I qualify for the better class of funds with lower expense ratios (i.e. fidelity premium - .035% ER vs fidelity investor - .09% ER, and then possibly doing $11000 later for my spouse (if we can save it by the deadline)?

    Or when I am buying the funds, will it separate it into 2017 and 2018 and not allow me to reach the minimum for the better class (minimum is $10000)?

    Thanks for any advice.

  • #2
    5.5 basis points isn't going to make a big difference over a matter of months or even a year on $11,000. That's a cost of $5.65 per year. Most days, the value of the investment will go up or down by significantly more than that.

    Invest what you can when you can.

    Cheers and welcome to the forum!

    -PoF

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    • #3




      So I have maxed out my 401k and just got a bonus and would like to do a Roth IRA for the first time ever.  I would like to contribute the maximum for a Roth IRA for me and my spouse (via backdoor Roth) but wondered if it would be better to wait until January and do $11000 (for 2017 and 2018 simultaneously) for just me so that I qualify for the better class of funds with lower expense ratios (i.e. fidelity premium – .035% ER vs fidelity investor – .09% ER, and then possibly doing $11000 later for my spouse (if we can save it by the deadline)?

      Or when I am buying the funds, will it separate it into 2017 and 2018 and not allow me to reach the minimum for the better class (minimum is $10000)?

      Thanks for any advice.
      Click to expand...


      If you can backdoor Roth right now for 2017 and then again in another month for 2018 you'll be fine - within the same fund family you can exchange that same day without delay, cost or expenses.  Basically, you can get the ER you want next year anyway after you do the new conversion.  You can do this online or talk to a Fidelity agent.  What's worse - the opportunity cost of waiting another 12 days or the ((0.0009-0.00035)/365)*12*$5000 ER between now and then?  I'd just do it now and exchange fund classes later.

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      • #4
        "I’d just do it now and exchange fund classes later"

        That makes sense.  Thanks for the input to both.

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