Backdoor Roth...I think I did this wrong, what now?

[meshdo]

First time doing Backdoor Roth this year. I added $11k into a traditional IRA a little over a week ago, but didn't realize I should leave it in the Settlement Fund before converting. Now it's divided between three Vanguard mutual funds (VBLTX, VGTSX, & VTSMX in case that's relevant) and when I try to convert, it tells me I don't have any funds available for conversion.

Given the dip in the market in the last couple of weeks, I've actually lost money so my balance is now under $11k (~10,700) Should I sell so that the money goes back into my settlement account, and then make an rIRA and convert?

Thank you!

[orthodds]

I don’t think this is a problem. Check this out and see if it helps:

https://investor.vanguard.com/ira/how-to-convert-traditional-ira-to-roth-ira

Should be able to initially fund the rIRA by exchanging one of your tIRA funds, then go back and exchange the others.

[cgossage]

You can still convert after you are invested.  Vanguard usually waits for the money to clear, so try again later and the week and you will be fine.

[The Physician Philosopher]

Money has to clear. Takes 7 days. Once cleared you have the funds. Make sure to make a Roth IRA and "fund it later" (i.e. fund a roth with zero dollars).

To be clear, this is 5500 for you and 5500 for your spouse, I presume? You cannot contribute $11000 yourself (unless doing TY 2017 and TY 2018, which can be done until April).

[Dreamgiver]

You also can't do yours and your spouse's on the same account. Its an INDIVIDUAL retirement account.

[meshdo]

Finally got around to doing this and I think I converted all $11k -- this is my first time doing a backdoor Roth so that includes $5.5k for last year.

I now have another issue-- I followed Physician On Fire's tutorial, and even though I selected "Tax Year 2017" for one of the contributions, after I went through with the conversion, my rollover contribution for 2017 is showing up as 0, with all 11k ending up under Tax Year 2018. Is this going to be a problem when I go to fill out the 8606?

[Peds]

meshdo wrote:

Finally got around to doing this and I think I converted all $11k — this is my first time doing a backdoor Roth so that includes $5.5k for last year.

I now have another issue– I followed Physician On Fire’s tutorial, and even though I selected “Tax Year 2017” for one of the contributions, after I went through with the conversion, my rollover contribution for 2017 is showing up as 0, with all 11k ending up under Tax Year 2018. Is this going to be a problem when I go to fill out the 8606?

Click to expand...

you notify the IRS for the year you do the conversion. since you did it in 2018, its goes on your 2018 8606.

the contributions can be done outside the calendar year which is fine.

for the future, it makes it much easier to do both the contribution and conversion in the same year.

[jfoxcpacfp]

meshdo wrote:

even though I selected “Tax Year 2017” for one of the contributions, after I went through with the conversion, my rollover contribution for 2017 is showing up as 0, with all 11k ending up under Tax Year 2018. Is this going to be a problem when I go to fill out the 8606?

Click to expand...

You should have reported the 2017 TIRA contribution on a 2017 Form 8606. This would have shown the contribution only, not a conversion. In 2018, you will show the 2nd contribution of $5,500 but a conversion of the amount that you converted from your TIRA to your Roth. I agree with @peds that it is usually less confusing if you contribute and convert in the same calendar year, but that's not always possible, especially if you wait till the 1st quarter of the year to contribute for the previous tax year.