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School me on contributing to Roth IRA when income exceeds the limit
Posted on 1/6/25 at 3:07 pm
Posted on 1/6/25 at 3:07 pm
Do I have this process correct: I can contribute $7,000 to a traditional IRA. Wait 1 day. Then move (convert) that $7,000 to a Roth IRA. From there I can do whatever I want with the $7,000 that I moved from the traditional to Roth.
Is that accurate?
Is that accurate?
5
Posted on 1/6/25 at 3:12 pm to BlueChips
Yes. And then track it in your tax filings as a nondeductible contribution.
Posted on 1/6/25 at 3:14 pm to BlueChips
Posted on 1/6/25 at 4:22 pm to lynxcat
quote:
Yes. And then track it in your tax filings as a nondeductible contribution.
What does that do? I’m clueless about that stuff.
Posted on 1/6/25 at 4:37 pm to Rize
Need to file form 8606 with your tax return. Lookup how to fill it out for backdoor Roth
@OP, look up pro rata rule. Basically if you have a significant amount of money already in Trad IRA or SEP IRA you need to reconsider the backdoor (and/or in some cases, convert the IRA to Roth and eat the tax bill)
@OP, look up pro rata rule. Basically if you have a significant amount of money already in Trad IRA or SEP IRA you need to reconsider the backdoor (and/or in some cases, convert the IRA to Roth and eat the tax bill)
Posted on 1/6/25 at 4:53 pm to Sir Saint
quote:
Need to file form 8606 with your tax return. Lookup how to fill it out for backdoor Roth @OP, look up pro rata rule. Basically if you have a significant amount of money already in Trad IRA or SEP IRA you need to reconsider the backdoor (and/or in some cases, convert the IRA to Roth and eat the tax bill)
Gotcha. That’s why I can’t do a backdoor Roth for my wife because she has an IRA with a good amount in it so the taxes would kill me. Would be nice to do 7k for each of us but not worth it.
This post was edited on 1/6/25 at 4:55 pm
Posted on 1/6/25 at 8:20 pm to Sir Saint
I have no traditional IRA currently. My plan was to open one on Fidelity to send the $7k to and then move that $7k over to my Roth IRA on fidelity
Posted on 1/6/25 at 9:03 pm to Rize
To avoid the pro rata extra tax penalty some people will convert their traditional IRA into their current 401k. Then when you convert the 2025 traditional contribution into Roth you should be okay
Posted on 1/7/25 at 8:57 am to BlueChips
I’m having an issue with Fidelity currently. I made my $8000 deposit into my IRA on Jan 2nd. I went to convert to my Roth on Jan 6th and got an error message. Called Fidelity and they said there is a hold on Electronic deposits until January 25th due to multiple fraud issues with electronic deposits at end of December. Anyone else having this issue with Fidelity???
Posted on 1/7/25 at 10:12 am to molsusports
quote:
To avoid the pro rata extra tax penalty some people will convert their traditional IRA into their current 401k. Then when you convert the 2025 traditional contribution into Roth you should be okay
We had to do this at the end of last year with an old rollover IRA that was pre-tax to do our first conversion due to income limits (which we knew were happening earlier this past year). Just rolled a vanguard rollover IRA into my wife's current 401k provider, and then did the 2 traditional to roth conversions with our traditional IRAs after that so we didnt get pro-rata'd and hit with a huge tax bill.
This post was edited on 1/7/25 at 10:13 am
Posted on 1/7/25 at 11:11 am to Rize
quote:
That’s why I can’t do a backdoor Roth for my wife because she has an IRA with a good amount in it so the taxes would kill me. Would be nice to do 7k for each of us but not worth it.
I think you can start a separate Rollover IRA to use just for back doors.
Posted on 1/7/25 at 11:13 am to Mr. Curious
quote:
Called Fidelity and they said there is a hold on Electronic deposits until January 25th due to multiple fraud issues with electronic deposits at end of December. Anyone else having this issue with Fidelity
Yes. I had this issue in 2024. I was pulling the funds from my NFCU bank account so there was a hold on the funds. They told me the same thing. I’m not sure if you use funds from an existing Fidelity account if the hold would apply.
Posted on 1/7/25 at 12:34 pm to hottub
quote:
I think you can start a separate Rollover IRA to use just for back doors.
No, the pro rata rule considers ALL of your IRA accounts, your statement is incorrect. Don't do what you recommend above if you have existing qualified IRAs, you have to move those funds into another qualified account before you do the backdoor conversion.
Read up on the rule before giving incorrect advice.
Posted on 1/7/25 at 12:51 pm to hottub
quote:
I’m not sure if you use funds from an existing Fidelity account if the hold would apply.
It does not. I transferred $7k from my normal fidelity account to my traditional IRA yesterday. This morning, I converted that to my Roth without issue.
Posted on 1/7/25 at 6:57 pm to BlueChips
I got a ROTH IRA question.
A financial advisor told me the contributions can only come from earned income (income from a job). I though it could be from Modified adjusted gross income (MAGI) income from various sources. I got to retire early and my income comes from divys and interests and sales of stocks (capital gains). Not 59 and half yet so I still want to contribute. What I see online is the contribution can come from AGI and MAGI. I think he has it wrong.
A financial advisor told me the contributions can only come from earned income (income from a job). I though it could be from Modified adjusted gross income (MAGI) income from various sources. I got to retire early and my income comes from divys and interests and sales of stocks (capital gains). Not 59 and half yet so I still want to contribute. What I see online is the contribution can come from AGI and MAGI. I think he has it wrong.
This post was edited on 1/8/25 at 2:03 pm
Posted on 1/7/25 at 7:03 pm to leeman101
quote:
A financial advisor told me the contributions can only come from earned income (income form a job)
He's right. Check it yourself with chatgpt.
Posted on 1/7/25 at 10:00 pm to BlueChips
If you already have a chunk, just keep going with the traditional IRA and a brokerage account
Posted on 1/8/25 at 7:31 pm to Mr. Curious
I am having the EXACT same experience this year. In years past it has taken a week or less.
Posted on 1/8/25 at 7:45 pm to tgrmeat
Three downvotes to my original post…did I say something inaccurate?
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