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Time for backdoor roth?
Posted on 11/13/18 at 1:02 pm
Posted on 11/13/18 at 1:02 pm
Probably a dumb question, but I can't find anything on line regarding this:
Is there a minimum amount of time you have to wait between adding money to an IRA, and then converting it to a Roth IRA?
For instance, could I add $5500 to an IRA and then convert it to a Roth 2 days later? Thanks folks.
Is there a minimum amount of time you have to wait between adding money to an IRA, and then converting it to a Roth IRA?
For instance, could I add $5500 to an IRA and then convert it to a Roth 2 days later? Thanks folks.
5
Posted on 11/13/18 at 1:10 pm to indytiger
White coat investor guy has a pretty good step by step. I think he waits a day.
Posted on 11/13/18 at 2:25 pm to indytiger
Pretty sure you want to do it as soon as possible, like the next day, so that you don’t have to pay taxes on any gains when you convert it.
Posted on 11/13/18 at 2:27 pm to oob02
quote:
Pretty sure you want to do it as soon as possible, like the next day, so that you don’t have to pay taxes on any gains when you convert it.
Yeah. It will just go into a money market account, so it should only gain about $0.01.
Posted on 11/14/18 at 11:29 am to indytiger
quote:
Probably a dumb question
Have another.
If I contribute to an IRA, and convert it a day after, can I still take the deduction on my taxes?
Asking for a friend.
This post was edited on 11/14/18 at 11:31 am
Posted on 11/15/18 at 12:19 am to Kreg Jennings
quote:Well if you use deductible contributions, and convert then you are liable for that contribution (and any gains) when you convert it to a Roth. So if you contributed the $5,500 as deductible then converted it to a Roth, you would claim the deduction and claim the income on the same form. So it’s a net of 0. And any non-deductible contributions that are converted are a net of 0 as well since you wouldn’t claim either a deduction or income.
Have another.
If I contribute to an IRA, and convert it a day after, can I still take the deduction on my taxes?
Asking for a friend.
Posted on 11/15/18 at 1:13 pm to indytiger
LINK
Backdoor roth is only useful for those making more than $189k AGI (for married jointly). It allows you to make a non-deductible contribution to a traditional IRA, then rollover to a Roth IRA within a few days. Just an easy loophole that every high income earner should do every year as the appreciation of those investments will not be taxable upon sale/withdrawal. It's also a great place to speculate a bit as there is no such thing as capital gains inside of that account. You can trade as frequently as you'd like with no tax consequences.
Backdoor roth is only useful for those making more than $189k AGI (for married jointly). It allows you to make a non-deductible contribution to a traditional IRA, then rollover to a Roth IRA within a few days. Just an easy loophole that every high income earner should do every year as the appreciation of those investments will not be taxable upon sale/withdrawal. It's also a great place to speculate a bit as there is no such thing as capital gains inside of that account. You can trade as frequently as you'd like with no tax consequences.
Posted on 11/17/18 at 8:05 pm to Breauxfessor
What if you already contributed monthly to a Roth IRA this year and you now need to do the backdrop Roth for 2018?
Posted on 11/18/18 at 11:21 am to indytiger
(no message)
This post was edited on 11/20/18 at 6:06 pm
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