Starting a backdoor Roth IRA

[dirtbiker]

I'm going to be doing a backdoor Roth for the first time this year. Actually my wife and I will both be doing this.

I currently have a pretax rollover IRA that I am going to be rolling over to my current 401K so that I won't have any pretax IRA money in the mix. Once this is done, I will only have a brokerage account and my 401K.

My brokerage is through Etrade, and I'd like to stay with them for the IRA. The money to fund the IRA will be pulled from my brokerage account. The way I understand it is that I will open up a traditional IRA and transfer in aftertax money from the brokerage account. Then I will open up a Roth IRA and then roll over the tIRA into the Roth IRA. Is this correct? There are no issues with having it all done through the same broker, right?

And we'll be doing the same thing with my wife as well.

Do I need to wait a specific amount of time after rolling over my pretax traditional IRA into my 401K to do this? Or once the IRA is rolled over, I'm good to go?

[3moreyears]

I did this for the first time earlier this year and your understanding is how I did it. I did use Vanguard and the linked instructions but should be similar with Etrade. https://www.physicianonfire.com/backdoor/

[dirtbiker]

Thank you for the link!

[gauss]

If you are doing anything more than an annual contribution (rollovers, conversions etc), you might want to do just a small amount the first year (ie 10%). That way, if you misinterpret any important detaisl you will be able to minimize the tax impact and correct your strategy before moving the big $.

That is what I did when I "isolated the basis" between my 401k and traditional IRAs so that I was able to get things into a Roth without paying very much tax at all upfront.

-gauss

[pjigar]

Yes. Your understanding is correct. About wait times: Some people say wait for a year before transferring from IRA top Roth IRA. I just transfer as soon as the contribution clears.