Backdoor Roth Questions

[tcu2003]

Anyone familiar with backdoor Roth IRAs?  To do this, do I open a traditional IRA for both DH and I, contribute the funds, and then as soon as they are confirmed, transfer them to Roth IRA accounts?  As a bonus, anyone have experience with Vanguard - is this easy to do on their website?

[SVT]

Yes, I have a few years of experience doing this with Vanguard.  It's very easy to do online on Vanguard's website.  There are some brokerages, for instance Merrill Edge (at least as of a year or so ago) that require you to call in to do a Roth conversion.  Vanguard makes it easy to do yourself online. 

1. Open Traditional IRA (if you don't already have one open)
2. Fund account and wait for funds to settle
3. Convert to Roth IRA (there's a menu option that says exactly that)

That's a very broad overview of what to do.  Super simple.  I invest the funds in the Traditional IRA into a Money Market Fund so there's no wild swings.  I convert immediately after funds have settled anyway, though.

I just googled "backdoor roth ira vanguard" and found this step by step guide by POF, as the first result, specifically using Vanguard, with screenshots and all.

www.physicianonfire.com/backdoor/

[CCL]

Fidelity makes it very easy, too.

[Deleted]

Keep in mind if you already have money in a Traditional IRA it complicates things. 

[tcu2003]

Mar 5, 2019 8:41:00 GMT -5 minnesotapaintlady said:

Keep in mind if you already have money in a Traditional IRA it complicates things. 

Yep, that I did know. Thankfully, DH has been at the same company his entire working career, and has no investments outside his 401k, and I never converted my old 401k to an IRA when I left my previous employer. I have an existing Roth IRA, but no traditional IRA, so we’re each good on that front.

[bean29]

How/when do the taxes get paid? You are not converting existing 401K $ but using $ saved from current year income? So taxes paid with your income taxes?

[Deleted]

Mar 6, 2019 7:42:00 GMT -5 bean29 said:

How/when do the taxes get paid? You are not converting existing 401K $ but using $ saved from current year income? So taxes paid with your income taxes?

There aren't any taxes to pay because it was never pre-tax money.  You put money in a traditional IRA and convert it immediately before the contribution is ever deducted on your taxes.  OP wouldn't qualify for a deductible traditional at her income anyhow. 

[tcu2003]

What mpl said. We each maxed our 401k accounts last year, so just looking to do something extra since we had some extra cash on hand.