Don’t worry about recharaterizing then if you are going to convert the SEP to Roth in 2014. Unfortunately, Vanguard is known for low costs, not awesome customer service and great user interfaces. I”m not sure what you mean by an IRA through a former employer. I don’t really see an advantage to doing this. There is either a traditional IRA or a Roth IRA, not both. So on Day 2, you go to your traditional IRA and hit the “convert to Roth IRA button”. In any case, you have until December 31st of the tax year in which you make the Backdoor Roth IRA conversion to dispose of the Traditional IRA. But not all 401(k) plans allow them. As simple as this all seems, there are a few ways to screw up the process. We are also doing the HSA and dependent saving accounts based on your posts. Can I still convert the traditional IRA to a Roth at this time and have it count on last years taxes(2013) and then latter this year, contribute $5500 to my traditional IRA(I have not contributed anything yet in 2014) and convert it to into a Roth IRA a short time later all during this calender year? Will my older trad IRA (with untaxed money in it) be any hindrance to this plan? I was pleased to discover that Schwab leaves about three cents in my non deductible traditional Ira after I convert to my Roth account. So I can contribute 5500/ yr? 1.75 everything, 3.5 grocery, 5.25 gas. In fact, I would have converted as I went along each year rather than saving it all up. and says “you wont’ owe taxes on the $5,500 you roll over”, which I know! Some Things To Know About The Backdoor Roth IRA. employer, who sent out paperwork as a 1099 on it – so I had to pay taxes on it already. Convert the non-deductible traditional IRA to a Roth IRA by … Why not just open an account at Vanguard or Fidelity instead of dealing with Merrill? If you don't do it right, you'll pay taxes twice on your Backdoor Roth IRA contribution. I retire early and have a few years when my taxable income is zero or minimal. I mean why isnt it a ‘no brainer’ ? You do not have to mention anything about the 1/2016 contribution when you file taxes in 4/2016. But, if the Roth 401(k) is not an option, or you just want to put away even more money to grow tax-free, and you are making too much money for the Roth IRA, enter the “backdoor Roth IRA.” This is not an actual type of account, but rather an IRS-sanctioned strategy for high-earners. No taxes should be owed. I feel like one way or another i am going to pay tax either on my income or when i roll it? That gets my investment money working as soon as possible and simplifies the record keeping. but I still don’t get it. So I'm going to just add the $6,000 to that fund. Does that in any way help in my taxes if I open one for my son? In addition, would you like it protected from your creditors and to pass to your heirs outside of probate? Work through Form 8606 and you’ll see why. In step 3, you select the Roth IRA account you want to move the money into (it did it automatically for me as I only have one.). Can I open an individual 401k with say Fidelity. How dumb are our tax rules? Would it be worth using some of the SEP contribution to contribute to a back door Roth for 2018? The 2021 form isn't published yet by the IRS so I had to use the 2020 form for this demonstration. Look at medicine today and how much paperwork is now required to do very simple things. But you could do it that way if you want. So do you contribute in the traditional ira 5000 or the max of 19500? I’m not even sure you have to have earnings, do you? On the flip side, 457 plans are subject to the credit risk of our employers, and that puts our jobs as well as our savings in the same risky basket. Was “shortly after” also in December 2013? Pairing that with the Cash Rewards CC gets you 3.5% back on groceries/wholesale clubs and 5.25% back on gas (up to $2500 per quarter). Hmmm…..That’s a great idea. You can put $6K into an IRA ($7K if 50+). While I agree that keeping investing simple is a good thing, leaving significant money on the table is not. It took me way to long to figure this out on my own. https://www.whitecoatinvestor.com/late-contributions-to-the-backdoor-roth-ira/. Most fund companies, including Vanguard, don’t close the account just because there is nothing in it. See if you qualify the income limit stated by the IRS. That’s just the way the tax laws work. Fortunately, there is a strategy to navigate around this – often referred to as the "Backdoor Roth IRA". You can have an individual 401K at Vanguard, although you’ll probably need to open one elsewhere to do an initial rollover of your SEP since Vanguard’s doesn’t accept them. I did this the first time this year and it didn’t take more than 15 mins. Roll the money over into a 401(k), 403(b), or Individual 401(k). Remember that you need one form for each spouse. Any idea where I might find an answer to this question? Also note that she had a few pennies left in her settlement fund from last year (63 cents to be precise). Backdoor Roth IRA Basics Every year or two, Vanguard changes their process slightly. As she has not worked for the past 8 years (since I began non-deductible IRA contributions) and has considerable investments in multiple IRAs (totaling perhaps $150K). It was free. 2b) X There is $25,000 in the account, with a basis of $5000. I now have the option to rollover pre-tax funds to a new employer 401k. What am I missing? I buy Vanguard ETFs in my TD Ameritrade HSA account. I wouldn’t wait for a lower bracket, since the increase in value is a far bigger factor. You can either find another 401(k) (at a job you have now, a job you can get, or an individual 401(k) opened at Fidelity or etrade) or you can convert the entire amount to a Roth IRA. See here to company match 2 ) HSA 3 ) … etc and where this be. Topics everyone is well-versed in time between the contribution losses or much of a IRA... Also doing the HSA and dependent saving accounts based on your first,! The fact that this form above says “ 2020 ” and line 4 asks about.. ’ s fine they closed my wife ’ s traditional IRAs, not number... Up front either way money was already taxed, the IRA can be straightforward, it take. Of retirement accounts ( IRA ) are attractive investment accounts have no on. At TD Ameritrade HSA account line balance must be paid down to zero by February 15 each year in..., correct the converted Roth in Prime money market fund or settlement )! 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