I’m going to be utilizing a backdoor Roth for the first time in 2018 and was hoping for some clarification/validation to ensure I’m doing it correctly and my plan will work.
Background: military ER doc, moonlighting on the side
Previously have contributed to Roth IRA’s for my wife and myself as previously always below the limit; had automatic deposits set up at a different financial institution that deposited money ($458.33 monthly for each of us -total of $1,375 each) in Jan, Feb, and March before I recognized that my MAGI may be over the limit this year so I stopped them. This summer I felt I had enough financial literacy to break off from my financial advisor at my old institution and I moved all my investments to Vanguard.
I now am fairly certain that my moonlighting income will push me over the MAGI limit so I will need to utilize backdoor Roth. Unfortunately, as above, I had already contributed money to Roth accounts this year.
I have a traditional IRA at Vanguard (a prior rollover from residency) that is in process of rolling over to the TSP – so by Dec 31 of this year that account should have $0.
My wife has no competing IRA’s (only has a Roth IRA at Vanguard).
My plan:
1. Get money out of trad IRA as above (I have no other competing plans that would prevent the backdoor conversion).
2. On Jan 2nd, I will open a traditional IRA at Vanguard for my wife and contribute $4,125 to it ($5500 – the $1375 ($458.33 x 3) contributed to Roth as above) and contribute the same amount to my traditional IRA
3. On Jan 3rd, I will transfer $1,375 from each of our Roth IRAs to our traditional IRA’s
4. On Jan 4th, I will transfer the entire $5,500 in each account back to the Roth accounts
5. Then I will very carefully fill out the 8606 forms following the above post and late contribution post guidelines
A few questions/concerns:
A. Should I actually contribute $10,125 to each traditional IRA account on the 2nd (and then transfer $11,500 from each account back to Roth account the next day) as I am actually doing my 2018 AND 2019 contributions at the same time (with the limit increasing to $6,000 in 2019)?
B. I’m not sure exactly which funds the $1,375 I’ve already put into each Roth account went into – does that matter? Or can I just transfer $1,375 out of the fund I have the most in? If it does matter, I’m not sure how to recall/transfer the money out of those specific accounts and am at risk for being penalized for contributing to a Roth in a year in which my MAGI is too high – any advice?
Thank you for your help!
Background: military ER doc, moonlighting on the side
Previously have contributed to Roth IRA’s for my wife and myself as previously always below the limit; had automatic deposits set up at a different financial institution that deposited money ($458.33 monthly for each of us -total of $1,375 each) in Jan, Feb, and March before I recognized that my MAGI may be over the limit this year so I stopped them. This summer I felt I had enough financial literacy to break off from my financial advisor at my old institution and I moved all my investments to Vanguard.
I now am fairly certain that my moonlighting income will push me over the MAGI limit so I will need to utilize backdoor Roth. Unfortunately, as above, I had already contributed money to Roth accounts this year.
I have a traditional IRA at Vanguard (a prior rollover from residency) that is in process of rolling over to the TSP – so by Dec 31 of this year that account should have $0.
My wife has no competing IRA’s (only has a Roth IRA at Vanguard).
My plan:
1. Get money out of trad IRA as above (I have no other competing plans that would prevent the backdoor conversion).
2. On Jan 2nd, I will open a traditional IRA at Vanguard for my wife and contribute $4,125 to it ($5500 – the $1375 ($458.33 x 3) contributed to Roth as above) and contribute the same amount to my traditional IRA
3. On Jan 3rd, I will transfer $1,375 from each of our Roth IRAs to our traditional IRA’s
4. On Jan 4th, I will transfer the entire $5,500 in each account back to the Roth accounts
5. Then I will very carefully fill out the 8606 forms following the above post and late contribution post guidelines
A few questions/concerns:
A. Should I actually contribute $10,125 to each traditional IRA account on the 2nd (and then transfer $11,500 from each account back to Roth account the next day) as I am actually doing my 2018 AND 2019 contributions at the same time (with the limit increasing to $6,000 in 2019)?
B. I’m not sure exactly which funds the $1,375 I’ve already put into each Roth account went into – does that matter? Or can I just transfer $1,375 out of the fund I have the most in? If it does matter, I’m not sure how to recall/transfer the money out of those specific accounts and am at risk for being penalized for contributing to a Roth in a year in which my MAGI is too high – any advice?
Thank you for your help!
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