Back door Roth oops

[dadoftwo]

I got the idea about backdoor Roth here (awesome, thanks) and executed it for myself fine. My wife, I made an ooops. I funded the Ira with 5500 but then had a family emergency and forgot about it. 2 weeks later and I now have 5503.54 in the Ira. So do I just transfer 5500 into the Roth and leave the 3.54 in the traditional Ira? What are my options at this point?

[Animorph]

Quote:

Originally Posted by dadoftwo I got the idea about backdoor Roth here (awesome, thanks) and executed it for myself fine. My wife, I made an ooops. I funded the Ira with 5500 but then had a family emergency and forgot about it. 2 weeks later and I now have 5503.54 in the Ira. So do I just transfer 5500 into the Roth and leave the 3.54 in the traditional Ira? What are my options at this point?

You can convert the entire $5503.54, you'll just owe taxes on the additional $3.54. That's what I do.

[kaneohe]

.........and you have no other TIRAs w/ deductible contributions, right?

[dadoftwo]

I don't but gosh darn it my wife has a small traditional Ira from years ago. I need to check and see how much is in there. I had forgotten about that!

[kaneohe]

Your wife's TIRA won't affect the calculation since it's based on each individual's
situation (the I in IRA). Just to double-check the lingo............your income is too high for a deductible TIRA and you have a retirement plan at work?

[dadoftwo]

Income is too high for deductible TIRA. We both have retirement plans at work. She has a 401k and I have a TSA that we max. I also have a pension plan or what my work calls a supplemental plan B that they put in 10% but I also add 10% to after tax money. I wanted to execute back door Roth iris for both of us but now have noticed 2 problems.

1. My wife's TIRA is now worth 5505 and I thought the most I could put to the Roth per year was 5500. But maybe I can transfer the entire 5505 and pay taxes on the 5?

2. I added 5500 to my TIRA on 4/14 but the transfer to the Roth IRA doesn't appear to have happened until 4/16. Then I added another 5500 to my TIRA thinking I was going to transfer that into my Roth for 2014. Problem is According to vanguard, I already did my 5500 2014 contribution cause I was a day late in getting the initial 5500 over. Ugh!

Any advice for this first time flop?

[Animorph]

Quote:

Originally Posted by dadoftwo Income is too high for deductible TIRA. We both have retirement plans at work. She has a 401k and I have a TSA that we max. I also have a pension plan or what my work calls a supplemental plan B that they put in 10% but I also add 10% to after tax money. I wanted to execute back door Roth iris for both of us but now have noticed 2 problems. 1. My wife's TIRA is now worth 5505 and I thought the most I could put to the Roth per year was 5500. But maybe I can transfer the entire 5505 and pay taxes on the 5? 2. I added 5500 to my TIRA on 4/14 but the transfer to the Roth IRA doesn't appear to have happened until 4/16. Then I added another 5500 to my TIRA thinking I was going to transfer that into my Roth for 2014. Problem is According to vanguard, I already did my 5500 2014 contribution cause I was a day late in getting the initial 5500 over. Ugh! Any advice for this first time flop?

1. The backdoor tIRA to Roth part is actually just a pure Roth conversion. There are no limits on how much you can convert. You'll just need to pay the taxes. An existing deductible tIRA held by the same person just ups the taxes.

2. You should have the option to select which tax year a contribution is for at the time you make it. But I think you should be able to get Vanguard to withdraw your second 2014 contribution. You might see if you can just get the tax year corrected on the first contribution, providing it was on or before 4/15.

[Alan]

Quote:

Originally Posted by dadoftwo I got the idea about backdoor Roth here (awesome, thanks) and executed it for myself fine. My wife, I made an ooops. I funded the Ira with 5500 but then had a family emergency and forgot about it. 2 weeks later and I now have 5503.54 in the Ira. So do I just transfer 5500 into the Roth and leave the 3.54 in the traditional Ira? What are my options at this point?

Quote:

Originally Posted by dadoftwo 1. My wife's TIRA is now worth 5505 and I thought the most I could put to the Roth per year was 5500. But maybe I can transfer the entire 5505 and pay taxes on the 5? Any advice for this first time flop?

Just convert it all to a ROTH, there is no limit on conversions. Since you contributed $5,000 after tax then that is the basis. You will pay taxes on everything over that $5,000. You won't get a free ride on the first $500 of gains simply because that takes you to the annual contribution limit. (You haven't yet paid taxes on anything above the $5,000 you contributed)

[Sesq]

Quote:

Originally Posted by dadoftwo I don't but gosh darn it my wife has a small traditional Ira from years ago. I need to check and see how much is in there. I had forgotten about that!

So you have $5,500 plus $5, plus XXXX being her old IRA. You need to know that for her conversion (does not impact yours). If her old IRA is 10K you need to either convert $15,505 with basis of $5,500 and pay taxes on 10,005. Or if you convert less than the entire TIRA's you need to allocate the basis.

If she didn't have the old IRA, and the account grew $5, if you only converted $5,500 you would technically have to allocate some of the basis from the non deductible IRA to the remaining $5.

Long story short, either roll your wife's old IRA into a 401(k), or convert ALL of it and pay taxes on the amount greater than $5,500 (or allocate basis between the converted amounts and the non-converted pieces).

[dadoftwo]

Sorry not sure how this thread got so confused. Probably cause I don't know my wife's history. As it turns out, she had no prior TIRA. I recently put $5,500 into a TIRA with the intention to immediately transfer into ROTH. I waited and now got $5,508 in the TIRA. So my plan is to put all into ROTH and pay taxes on the $8. I thought I was limited to $5,500 into ROTH but it appears that's not the case. Thanks everyone for the help.

[LongPrime]

Quote:

Originally Posted by dadoftwo Income is too high for deductible TIRA. We both have retirement plans at work. She has a 401k and I have a TSA that we max. I also have a pension plan or what my work calls a supplemental plan B that they put in 10% but I also add 10% to after tax money. I wanted to execute back door Roth iris for both of us but now have noticed 2 problems.

You got a lot of taxable income when you retire. The small amount you have in the IRA is perhaps better used in a trading account where there are better tax advantages on dividends, cap loses and cap gains. IMO.

[dadoftwo]

Well, I have about 50k in my original Roth. It's in an optionsexpress account because I used to spend hours studying and trading options. But I just don't have the time now with 2 kids and a busy job and I don't want to trade options or stocks unless I'm on top of what I'm trading. So I'm gonna consolidate my and my wife's Roth at vanguard into a low fee fund. Maybe even one of those funds that target a retirement year. Never really believed in those (always thought I'd be 100% stocks til the end) but man, I'm just too busy to keep on top of things

[kaneohe]

Quote:

Originally Posted by dadoftwo I thought I was limited to $5,500 into ROTH but it appears that's not the case. .

An original annual contribution into a Roth is limited to 5.5K (unless 50 or older) but a conversion from TIRA into a Roth is not limited. Two C words
but different acts.