Skip Ahead Here! 0:00 - How To Do A Backdoor Roth In Fidelity (4 EASY STEPS) 0:35 - Step 1: Contribute to a Traditional IRA 2:44 - Step 2: Invest your contribution 4:23 - Step 3: Move your pre-tax IRAs to your current employer plan 6:01 - Step 4: Convert your Traditional IRA to a Roth IRA
I recently adjusted my Roth IRA to 50% in SCHD, 25% in SCHX, and 25% in SCHG. For my Roth 401k, I went with 70% in Vanguard's S&P 500 Index, 20% in the Vanguard Growth Index, and 10% in the Vanguard International Index. My goal is to grow my $350k to over $1 million within the next three years.
I agree-having an advisor manage my investments has been invaluable since my work schedule doesn't allow time for in-depth analysis. Thankfully, my portfolio has grown fivefold in just four years, reaching nearly $1 million today.
I consistently recommend Rebecca Lynne Buie as my top choice. She is well-known for her expertise in financial markets and has an impressive track record. I highly endorse her services.
Thank you for sharing! I did a quick search for Rebecca Lynne Buie online, found her consulting page, and scheduled a call. She seems to have a high level of expertise.
I just switched up my Roth IRA to 50% SCHD, 25% SCHX, and 20% SCHG. My Roth 401k is 70% vanguard S&P 500 index, 20% vanguard growth index, and 10% vanguard international index. Seeking best possible ways to raise $1m within 2-3 years before retirement.
Thanks for your comment. We cannot offer financial advice and recommend reaching out to your financial advisor for advice specific to your situation. Happy Thanksgiving!
this is correct. As soon as the money clears in Traditional IRA, you can convert it to ROTH IRA. Usually the money clears in 24hrs. Don't need to wait for a couple or few months to perform the backdoor conversation
I think investors should always put their cash to work, especially In 2024, we'll start to see more market diversification. I'm hoping to invest about $350k of my savings in stocks against next year. Hope to make millions in 2025
Since risk is at an all-time high right now, perhaps you should be a little more patient and return when it has decreased. Alternatively, you can consult a trained financial expert for strategy.
Yes true, I have been in touch with a brokerage Advisor. With an initial starting reserve of $80k, my advisor chooses the entry and exit commands for my portfolio, which has grown to approximately $550k.
My CFA NICOLE ANASTASIA PLUMLEE a renowned figure in her line of work. I recommend researching her credentials further... She has many years of experience and is a valuable resource for anyone looking to navigate the financial market..
Great video, when I talked with Fidelity this year, they said to just let the cash settle in the traditional IRA then you can immediately move it to your Roth IRA.
Step 2 is incorrect. I've done back door ROTH conversion with Fidelity before. As soon as the money is cleared into IRA account (usually 1 business day if moving from Fidelity brokerage into IRA), you can move money from IRA into ROTH IRA immediately, and don't have to worry about potential pro rata rule if kept in IRA account for an extended amount of time. Confirmed with my tax accountant on tax return Step Transaction Doctrine does not apply.
Thanks for the informative video..I like the comment where you cautioned about rollover IRA. I would need to do that first before doing the Roth conversion strategy :). One question my employer also provides ROTH 401K and Traditional 401k...Which one do you recommend given the presence of backdoor Roth?
Hi, Thank you for reaching out. While we cannot provide financial advice, we recommend consulting with your financial advisor. They can review your overall financial plan and help determine the best option for your situation. Thank you!
Great video. Thanks for explained this IRA mess. I am a retiree so I no longer contribute to neither IRA and 401k. My question is can I convert from existing traditional-IRA to Roth-IRA without making contribution(only doing step5)? I know this is taxable and need to be careful to the tax bracket.
To convert the stocks you already have in a traditional IRA to a Roth IRA through a backdoor Roth IRA process, follow these steps: 1. Evaluate Your Current Holdings: Review the stocks you currently hold in your traditional IRA. Consider whether you want to keep them or sell them during the conversion process. 2. Determine Tax Implications: Understand that converting from a traditional IRA to a Roth IRA is a taxable event. You will owe taxes on the amount converted, based on the current market value of the stocks. This means if your stocks have appreciated, you’ll pay taxes on those gains. 3. Decide on Conversion Method: You can either: a) Convert the stocks directly into a Roth IRA, keeping the same holdings (called an "in-kind" transfer). b) Sell the stocks in your traditional IRA, convert the cash to a Roth IRA, and then repurchase the stocks in the Roth account. 4. Execute the Conversion: Work with your IRA custodian to convert the desired amount from your traditional IRA to a Roth IRA. Specify whether you want to convert your holdings in-kind or as cash. 5. Plan for Taxes: Prepare to pay the taxes due on the conversion when you file your income tax return for the year. It might be wise to consult with a tax professional to estimate your tax liability and to consider making estimated tax payments. If you are interested in a comprehensive financial plan, including traditional IRA recommendations, please schedule a free discovery call with one of our financial planners - districtcapitalmanagement.com/join-the-waitlist/
Thanks. Great video. I am looking to do the backdoor Roth IRA. Quick Q - Does Fidelity send you some form to indicate this conversion? How do you report this backdoor Roth IRA / Contribution to the IRS when you complete the taxes? Thank you!
Thank you for your question. Fidelity will send you two forms: 1) Form 1099-R: This reports the Roth IRA conversion. Fidelity will issue this for the year you perform the conversion. 2) Form 5498: This reports the contributions to your IRA, which Fidelity will send to the IRS. We recommend working with a CPA to make sure that it's reported correctly on your taxes. Thanks!
Near as I can tell there is no waiting period necessary when converting traditional to Roth IRA. Based on my research the step transaction doctrine issue was canceled by congress in 2018. Maybe don’t ask five different financial “advisors,” just ask an accountant. Thanks for the video but this part needs clean up.
Great video, thanks! Quick question. If after investing your money in the traditional IRA for a few months your balance is more than the $7K limit for the year, you can still rollover the entire balance or you are limited to the $7K?
Very helpful! Most other videos I’ve seen on this, are to fund your traditional IRA, then transfer cash to Roth IRA, and then to invest money once it’s settled in Roth IRA? So you are saying to invest the money in Traditional IRA and then convert to Roth and few months later?
Thank you so much for this tutorial. What if I opened a traditional IRA non-deductible for the first time in March of 2024 and funded for 2023 and 2024 then I invested all the money. Now, it is September of 2024 and the account has accumulated dividends. Can I convert it to Roth now? Thank you in advance
Thank you for the video! One quick question: If $7000 is put into traditional IRA and I invest that money for couple of month (and lets say I gained $100 from that investment during this months). If I convert entire account balance to roth ira, wouldnt that go over the roth IRA limit of $7000?
If I cannot convert entire account balance and convert up to the limit (7,000). $100 remaining in traditional account, wouldnt this complicate the conversion in the next year because the account will contain both taxable($100+ capital gain) and non-taxable(amount already taxed on W2 that I will put in next year for roth ira conversion)?
Stupid Question: 2024 Income Limit for Traditional IRA is $146,000 Adjusted Gross Income - If you do not know how much your deductions, expenses will be, can I send $8,000 to Both Traditional IRA & Roth IRA then at tax time use the one that makes sense according to my adjuster gross income? Then do the back door if need be, then just transfer money back to my cash management account or other account since I can only deduct one $8,000 sum?
It's not a stupid question at all-this is a common area of confusion for many people navigating IRA contribution limits. For 2024, you can contribute up to $7,000 ($8,000 if you're 50 or older) combined across all IRAs (Traditional and Roth). If you're unsure about income limits and your eligibility for a Roth IRA, you can contribute to a Traditional IRA, then do a Backdoor Roth conversion. This involves converting your Traditional IRA contribution to a Roth IRA. However, keep in mind that if you have other pre-tax IRA balances, the conversion will be subject to the pro-rata rule, which could lead to a tax bill. A tax advisor or financial planner can help ensure you're maximizing your contributions without running afoul of IRS rules.
If RMDs are paid and being paid with a traditional rollover IRA w death benefit (spouse is bene)... Can you see any potential pitfalls in converting to a Roth? (Besides a current year potential tax increase?)
You cannot put your RMDs into a Roth as a Rollover. And why would you want to convert any inherited traditional IRA to Roth when you are already getting the benefit of the Stretch from inheriting it? I don't see the advantage.
not sure if I missed a step....you move your IRA funds from your traditional IRA to your COmpany 401k....but then open a Roth and move your traditional IRa to the Roth......there's nothing in the Trad. IRA as you moved it to the 401k. NO? Did I miss a step?
@@flowingwithjenna My understanding is if you do have any pre-tax IRA previously, then move them to your company 401k? But if you don't have a pre-tax IRA, then if this is the first IRA account you open, which is traditional IRA and it is post tax already (since we transferred the money from our bank), then we don't need this step.
Why? Anyone with earnings is allowed to have a nondeductible IRA. Anyone with a traditional IRA can convert to Roth. It could be years later. Explain why there is a timing problem.
Skip Ahead Here!
0:00 - How To Do A Backdoor Roth In Fidelity (4 EASY STEPS)
0:35 - Step 1: Contribute to a Traditional IRA
2:44 - Step 2: Invest your contribution
4:23 - Step 3: Move your pre-tax IRAs to your current employer plan
6:01 - Step 4: Convert your Traditional IRA to a Roth IRA
I recently adjusted my Roth IRA to 50% in SCHD, 25% in SCHX, and 25% in SCHG. For my Roth 401k, I went with 70% in Vanguard's S&P 500 Index, 20% in the Vanguard Growth Index, and 10% in the Vanguard International Index. My goal is to grow my $350k to over $1 million within the next three years.
It might be worth considering a financial advisor to avoid constant adjustments. Your selections are strong, especially for a $350k portfolio.
I agree-having an advisor manage my investments has been invaluable since my work schedule doesn't allow time for in-depth analysis. Thankfully, my portfolio has grown fivefold in just four years, reaching nearly $1 million today.
That's impressive! Would you mind sharing your advisor's details? I’m in urgent need of rebalancing my portfolio.
I consistently recommend Rebecca Lynne Buie as my top choice. She is well-known for her expertise in financial markets and has an impressive track record. I highly endorse her services.
Thank you for sharing! I did a quick search for Rebecca Lynne Buie online, found her consulting page, and scheduled a call. She seems to have a high level of expertise.
I just switched up my Roth IRA to 50% SCHD, 25% SCHX, and 20% SCHG. My Roth 401k is 70% vanguard S&P 500 index, 20% vanguard growth index, and 10% vanguard international index. Seeking best possible ways to raise $1m within 2-3 years before retirement.
Thanks for your comment. We cannot offer financial advice and recommend reaching out to your financial advisor for advice specific to your situation. Happy Thanksgiving!
In 2018 the IRS indicated that the use of a backdoor Roth IRA conversion process does not violate the step transaction doctrine.
this is correct. As soon as the money clears in Traditional IRA, you can convert it to ROTH IRA. Usually the money clears in 24hrs. Don't need to wait for a couple or few months to perform the backdoor conversation
@@trieu1185do we have to invest the money before converting to Roth?
I think investors should always put their cash to work, especially In 2024, we'll start to see more market diversification. I'm hoping to invest about $350k of my savings in stocks against next year. Hope to make millions in 2025
Since risk is at an all-time high right now, perhaps you should be a little more patient and return when it has decreased. Alternatively, you can consult a trained financial expert for strategy.
Yes true, I have been in touch with a brokerage Advisor. With an initial starting reserve of $80k, my advisor chooses the entry and exit commands for my portfolio, which has grown to approximately $550k.
I’ve been looking to switch to an advisor for a while now. Any help pointing me to who your advisor is?
My CFA NICOLE ANASTASIA PLUMLEE a renowned figure in her line of work. I recommend researching her credentials further... She has many years of experience and is a valuable resource for anyone looking to navigate the financial market..
I searched for her full name online, found her page, and sent an email to schedule a meeting. Hopefully, she responds soon. Thank you
Great video, when I talked with Fidelity this year, they said to just let the cash settle in the traditional IRA then you can immediately move it to your Roth IRA.
Step 2 is incorrect. I've done back door ROTH conversion with Fidelity before. As soon as the money is cleared into IRA account (usually 1 business day if moving from Fidelity brokerage into IRA), you can move money from IRA into ROTH IRA immediately, and don't have to worry about potential pro rata rule if kept in IRA account for an extended amount of time. Confirmed with my tax accountant on tax return Step Transaction Doctrine does not apply.
Thanks! Looked into this and you are right. Appreciate the help :D
Thanks for the informative video..I like the comment where you cautioned about rollover IRA. I would need to do that first before doing the Roth conversion strategy :). One question my employer also provides ROTH 401K and Traditional 401k...Which one do you recommend given the presence of backdoor Roth?
Hi, Thank you for reaching out. While we cannot provide financial advice, we recommend consulting with your financial advisor. They can review your overall financial plan and help determine the best option for your situation. Thank you!
Great video. Thanks for explained this IRA mess. I am a retiree so I no longer contribute to neither IRA and 401k. My question is can I convert from existing traditional-IRA to Roth-IRA without making contribution(only doing step5)? I know this is taxable and need to be careful to the tax bracket.
What do I do with the stocks I already have in a traditional IRA in order to be able to do the back door Roth ira
To convert the stocks you already have in a traditional IRA to a Roth IRA through a backdoor Roth IRA process, follow these steps:
1. Evaluate Your Current Holdings: Review the stocks you currently hold in your traditional IRA. Consider whether you want to keep them or sell them during the conversion process.
2. Determine Tax Implications: Understand that converting from a traditional IRA to a Roth IRA is a taxable event. You will owe taxes on the amount converted, based on the current market value of the stocks. This means if your stocks have appreciated, you’ll pay taxes on those gains.
3. Decide on Conversion Method: You can either:
a) Convert the stocks directly into a Roth IRA, keeping the same holdings (called an "in-kind" transfer).
b) Sell the stocks in your traditional IRA, convert the cash to a Roth IRA, and then repurchase the stocks in the Roth account.
4. Execute the Conversion: Work with your IRA custodian to convert the desired amount from your traditional IRA to a Roth IRA. Specify whether you want to convert your holdings in-kind or as cash.
5. Plan for Taxes: Prepare to pay the taxes due on the conversion when you file your income tax return for the year. It might be wise to consult with a tax professional to estimate your tax liability and to consider making estimated tax payments.
If you are interested in a comprehensive financial plan, including traditional IRA recommendations, please schedule a free discovery call with one of our financial planners - districtcapitalmanagement.com/join-the-waitlist/
Thanks. Great video. I am looking to do the backdoor Roth IRA. Quick Q - Does Fidelity send you some form to indicate this conversion? How do you report this backdoor Roth IRA / Contribution to the IRS when you complete the taxes? Thank you!
Thank you for your question.
Fidelity will send you two forms:
1) Form 1099-R: This reports the Roth IRA conversion. Fidelity will issue this for the year you perform the conversion.
2) Form 5498: This reports the contributions to your IRA, which Fidelity will send to the IRS.
We recommend working with a CPA to make sure that it's reported correctly on your taxes.
Thanks!
Near as I can tell there is no waiting period necessary when converting traditional to Roth IRA. Based on my research the step transaction doctrine issue was canceled by congress in 2018. Maybe don’t ask five different financial “advisors,” just ask an accountant. Thanks for the video but this part needs clean up.
Great video, thanks! Quick question. If after investing your money in the traditional IRA for a few months your balance is more than the $7K limit for the year, you can still rollover the entire balance or you are limited to the $7K?
Great question! You can only roll over the Roth IRA contribution limit for that year, so for 2024 that is $7k. Thanks!
@@DistrictCapital The IRA contribution is IRS-limited, the conversion to Roth is not limited.
Very helpful! Most other videos I’ve seen on this, are to fund your traditional IRA, then transfer cash to Roth IRA, and then to invest money once it’s settled in Roth IRA? So you are saying to invest the money in Traditional IRA and then convert to Roth and few months later?
Thanks for your question. Yes, that's correct. This will help you avoid the US step transaction doctrine.
Thank you so much for this tutorial. What if I opened a traditional IRA non-deductible for the first time in March of 2024 and funded for 2023 and 2024 then I invested all the money. Now, it is September of 2024 and the account has accumulated dividends. Can I convert it to Roth now? Thank you in advance
Thank you for the video! One quick question: If $7000 is put into traditional IRA and I invest that money for couple of month (and lets say I gained $100 from that investment during this months). If I convert entire account balance to roth ira, wouldnt that go over the roth IRA limit of $7000?
If I cannot convert entire account balance and convert up to the limit (7,000). $100 remaining in traditional account, wouldnt this complicate the conversion in the next year because the account will contain both taxable($100+ capital gain) and non-taxable(amount already taxed on W2 that I will put in next year for roth ira conversion)?
@@ygko9620 you can covert the entire amount but you will have to pay gains on that 100$, that is what my fidelity person told me
@@ygko9620following
Stupid Question: 2024 Income Limit for Traditional IRA is $146,000 Adjusted Gross Income - If you do not know how much your deductions, expenses will be, can I send $8,000 to Both Traditional IRA & Roth IRA then at tax time use the one that makes sense according to my adjuster gross income? Then do the back door if need be, then just transfer money back to my cash management account or other account since I can only deduct one $8,000 sum?
It's not a stupid question at all-this is a common area of confusion for many people navigating IRA contribution limits.
For 2024, you can contribute up to $7,000 ($8,000 if you're 50 or older) combined across all IRAs (Traditional and Roth).
If you're unsure about income limits and your eligibility for a Roth IRA, you can contribute to a Traditional IRA, then do a Backdoor Roth conversion. This involves converting your Traditional IRA contribution to a Roth IRA. However, keep in mind that if you have other pre-tax IRA balances, the conversion will be subject to the pro-rata rule, which could lead to a tax bill.
A tax advisor or financial planner can help ensure you're maximizing your contributions without running afoul of IRS rules.
If RMDs are paid and being paid with a traditional rollover IRA w death benefit (spouse is bene)... Can you see any potential pitfalls in converting to a Roth? (Besides a current year potential tax increase?)
You cannot put your RMDs into a Roth as a Rollover. And why would you want to convert any inherited traditional IRA to Roth when you are already getting the benefit of the Stretch from inheriting it? I don't see the advantage.
Are you planning to use the backdoor Roth IRA strategy this year?
not sure if I missed a step....you move your IRA funds from your traditional IRA to your COmpany 401k....but then open a Roth and move your traditional IRa to the Roth......there's nothing in the Trad. IRA as you moved it to the 401k. NO? Did I miss a step?
I was confused on this too
@@flowingwithjenna My understanding is if you do have any pre-tax IRA previously, then move them to your company 401k? But if you don't have a pre-tax IRA, then if this is the first IRA account you open, which is traditional IRA and it is post tax already (since we transferred the money from our bank), then we don't need this step.
Don’t listen to this guy. You HAVE to move $ from traditional Ira to Roth right away in order for backdoor to work.
Why? Anyone with earnings is allowed to have a nondeductible IRA. Anyone with a traditional IRA can convert to Roth. It could be years later. Explain why there is a timing problem.