Pesky 7-day waiting period for backdoor Roth steps at Vanguard

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Kookaburra
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Pesky 7-day waiting period for backdoor Roth steps at Vanguard

Post by Kookaburra »

My understanding of the recommended way to do the backdoor Roth process is:

On day 1: contribute to a money market fund in a traditional (non-deductible) IRA,

On day 2: convert it to a Roth IRA and invest in the fund of choice.

This achieves the goals of avoiding loss on the investment prior to converting (since it can’t be tax-loss harvested), and minimizing taxable gain of the converted amount.

OK, great. Now, can anyone tell me the preferred way to do it considering Vanguard has a pesky 7-day hold on the original deposit?

Two approaches come to mind:

1. Make the contribution in the money market fund and simply wait the 7 days to complete step 2. Of course, if the stock market goes up in those 7 days, you miss out on the gains if it’s destination was to be in equities (in which case, it would have been better to invest directly in the stock fund, wait 7 days, and pay tax on the gain).

2. Make the contribution directly in the desired equity fund, and then convert after the 7 days are up. If the fund goes down in value, you can’t tax loss harvest (TLH), but wouldn’t this be just like investing directly in a Roth since one can’t TLH there either?

So it seems like the 7-day holding period makes it advantageous to invest directly in the equity fund.

Thoughts? Is there a better strategy?

For those that do the backdoor at Fidelity, I’m curious if there is a similar holding period or if it can be converted next day?
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anon_investor
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Re: Pesky 7-day waiting period for backdoor Roth steps at Vanguard

Post by anon_investor »

Kookaburra wrote: Sun Oct 11, 2020 7:36 pm My understanding of the recommended way to do the backdoor Roth process is:

On day 1: contribute to a money market fund in a traditional (non-deductible) IRA,

On day 2: convert it to a Roth IRA and invest in the fund of choice.

This achieves the goals of avoiding loss on the investment prior to converting (since it can’t be tax-loss harvested), and minimizing taxable gain of the converted amount.

OK, great. Now, can anyone tell me the preferred way to do it considering Vanguard has a pesky 7-day hold on the original deposit?

Two approaches come to mind:

1. Make the contribution in the money market fund and simply wait the 7 days to complete step 2. Of course, if the stock market goes up in those 7 days, you miss out on the gains if it’s destination was to be in equities (in which case, it would have been better to invest directly in the stock fund, wait 7 days, and pay tax on the gain).

2. Make the contribution directly in the desired equity fund, and then convert after the 7 days are up. If the fund goes down in value, you can’t tax loss harvest (TLH), but wouldn’t this be just like investing directly in a Roth since one can’t TLH there either?

So it seems like the 7-day holding period makes it advantageous to invest directly in the equity fund.

Thoughts? Is there a better strategy?

For those that do the backdoor at Fidelity, I’m curious if there is a similar holding period or if it can be converted next day?
Where did this 7 day holding period come from. I do backdoor Roth at Vanguard and never experienced this.
tashnewbie
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Re: Pesky 7-day waiting period for backdoor Roth steps at Vanguard

Post by tashnewbie »

Confirm that you can’t use the money before the 7 days have passed.

I did a backdoor conversion a month or so ago, and was able to convert and invest money into Roth within like 2 days. As soon as the money has settled, I think it’s available to invest. But you couldn’t move the money out of Vanguard before the end of the hold period. YMMV. Confirm.
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Traveller
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Re: Pesky 7-day waiting period for backdoor Roth steps at Vanguard

Post by Traveller »

anon_investor wrote: Sun Oct 11, 2020 7:48 pm Where did this 7 day holding period come from. I do backdoor Roth at Vanguard and never experienced this.
I agree. I've done this many times without a 7 day wait period. My process is just as the OP described. I buy a money market fund in my non-deductible traditional IRA (with that money coming from a linked bank account at another institution). The next day I exchange that money market fund to an equity fund in my Roth IRA. I DO recall having a notice window pop-up saying I may not be able to withdraw those funds for a period of time, but it does not prevent the back door process.
Last edited by Traveller on Sun Oct 11, 2020 8:06 pm, edited 1 time in total.
Topic Author
Kookaburra
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Re: Pesky 7-day waiting period for backdoor Roth steps at Vanguard

Post by Kookaburra »

Hmm, when I did it early this year, I seem to recall there be an actual 7-day hold where I couldn’t convert. I’ll keep my fingers crossed that wasn’t or is no longer the case next year.
IMhooked
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Re: Pesky 7-day waiting period for backdoor Roth steps at Vanguard

Post by IMhooked »

It was 5-days for me. Had to wait for funds to settle, but a week's worth of lag-time over the duration of my investment career each year doesn't bother me that much.
tibbitts
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Re: Pesky 7-day waiting period for backdoor Roth steps at Vanguard

Post by tibbitts »

I don't believe I've ever encountered such a delay in a Vanguard mutual fund account. Can't comment on brokerage. As long as the funds remain at Vanguard they seem to be available immediately.
billfromct
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Re: Pesky 7-day waiting period for backdoor Roth steps at Vanguard

Post by billfromct »

Why can’t you just have your contribution money in your Vanguard taxable account MM or settlement MM fund then start the process from there? I believe that way the money would transfer at the end of the business day.

It’s not clear to me if you’re bringing in money from your outside bank or your taxable Vanguard account.

I’ve never done the back door Roth IRA process so can’t speak from experience.

bill
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anon_investor
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Re: Pesky 7-day waiting period for backdoor Roth steps at Vanguard

Post by anon_investor »

Kookaburra wrote: Sun Oct 11, 2020 8:04 pm Hmm, when I did it early this year, I seem to recall there be an actual 7-day hold where I couldn’t convert. I’ll keep my fingers crossed that wasn’t or is no longer the case next year.
While there may be a 7 day hold on being able to withdraw the money, there should not be one to convert. This is what I do:

1. contribute to my TIRA settlement account (this money is coming from my external bank account).
2. once these funds are "settled" which is usually 2 business days, I can then immediately convert to roth and invest.
JVT
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Re: Pesky 7-day waiting period for backdoor Roth steps at Vanguard

Post by JVT »

anon_investor wrote: Sun Oct 11, 2020 11:53 pm
Kookaburra wrote: Sun Oct 11, 2020 8:04 pm Hmm, when I did it early this year, I seem to recall there be an actual 7-day hold where I couldn’t convert. I’ll keep my fingers crossed that wasn’t or is no longer the case next year.
While there may be a 7 day hold on being able to withdraw the money, there should not be one to convert. This is what I do:

1. contribute to my TIRA settlement account (this money is coming from my external bank account).
2. once these funds are "settled" which is usually 2 business days, I can then immediately convert to roth and invest.
This matches my experiences.
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Eagle33
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Re: Pesky 7-day waiting period for backdoor Roth steps at Vanguard

Post by Eagle33 »

Maybe 7-days if one is creating a new bank link. But if using a preexisting bank link, then should be able to complete backdoor within 2 days.

Is there any delay if trying to purchase non-VG funds in Roth? I only have VG funds at VG.
pasadena
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Re: Pesky 7-day waiting period for backdoor Roth steps at Vanguard

Post by pasadena »

I've had this issue every year and I was just as frustrated as you. Until I stopped saving up that money at Ally and just did my backdoor Roth from my EF, which I hold at Vanguard, in my brokerage account.

The 7 days hold happens when you contribute outside money (maybe it depends on the bank, but I always had this issue from Ally). Transfer the money to your brokerage account, money market fund, in advance. You will be able to do the backdoor in a couple of days.
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Kookaburra
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Re: Pesky 7-day waiting period for backdoor Roth steps at Vanguard

Post by Kookaburra »

pasadena wrote: Mon Oct 12, 2020 10:46 pm I've had this issue every year and I was just as frustrated as you. Until I stopped saving up that money at Ally and just did my backdoor Roth from my EF, which I hold at Vanguard, in my brokerage account.

The 7 days hold happens when you contribute outside money (maybe it depends on the bank, but I always had this issue from Ally). Transfer the money to your brokerage account, money market fund, in advance. You will be able to do the backdoor in a couple of days.
Thank you! I will try this. Glad to know I’m not the only one and there is a work-around.
ryman554
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Re: Pesky 7-day waiting period for backdoor Roth steps at Vanguard

Post by ryman554 »

pasadena wrote: Mon Oct 12, 2020 10:46 pm I've had this issue every year and I was just as frustrated as you. Until I stopped saving up that money at Ally and just did my backdoor Roth from my EF, which I hold at Vanguard, in my brokerage account.

The 7 days hold happens when you contribute outside money (maybe it depends on the bank, but I always had this issue from Ally). Transfer the money to your brokerage account, money market fund, in advance. You will be able to do the backdoor in a couple of days.
I hate to be a stinker, but if you are just transferring money to your brokerage account in advance, you are ignoring the delay. If you have the money, you invest in an traditional IRA immediately and want to convert to a roth quickly. What you don't want is money just sitting there in a MM account doing nothing. The timing of the actual contribution and conversion are irrelevant. Goal is to get money as quickly as possible to the roth, and that is the complaint.

For what it's worth, I have the exact same problem at fidelity.
pasadena
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Re: Pesky 7-day waiting period for backdoor Roth steps at Vanguard

Post by pasadena »

ryman554 wrote: Tue Oct 13, 2020 8:34 am
pasadena wrote: Mon Oct 12, 2020 10:46 pm I've had this issue every year and I was just as frustrated as you. Until I stopped saving up that money at Ally and just did my backdoor Roth from my EF, which I hold at Vanguard, in my brokerage account.

The 7 days hold happens when you contribute outside money (maybe it depends on the bank, but I always had this issue from Ally). Transfer the money to your brokerage account, money market fund, in advance. You will be able to do the backdoor in a couple of days.
I hate to be a stinker, but if you are just transferring money to your brokerage account in advance, you are ignoring the delay. If you have the money, you invest in an traditional IRA immediately and want to convert to a roth quickly. What you don't want is money just sitting there in a MM account doing nothing. The timing of the actual contribution and conversion are irrelevant. Goal is to get money as quickly as possible to the roth, and that is the complaint.

For what it's worth, I have the exact same problem at fidelity.
You're right, you still have to transfer it to VG in advance. It depends on how you save that money. I save it over a few months at the end of the year so that I have it all ready on Jan 1st. So it's going to have to sit *somewhere* anyway because it can't go into the IRA before Jan 1st. The difference is, have it sit at Vanguard instead of have it sit at Ally and transfer it from there. Doesn't have to be a MM, one could totally invest it.
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hornet96
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Re: Pesky 7-day waiting period for backdoor Roth steps at Vanguard

Post by hornet96 »

pasadena wrote: Mon Oct 12, 2020 10:46 pm
The 7 days hold happens when you contribute outside money (maybe it depends on the bank, but I always had this issue from Ally).
This is not universally true. I transfer money from an outside bank every year, and am able to complete the backdoor process 1 to 2 days after initiating the transfer to the tIRA.

I think the OP (and perhaps you) need to go into your bank settings to see if there are any "verification" types of issues that need to be resolved. I did encounter an issue a few years ago when I converted from the mutual fund platform to the brokerage platform, where I had to basically re-link my same bank account (which has not changed in many years).
pasadena
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Re: Pesky 7-day waiting period for backdoor Roth steps at Vanguard

Post by pasadena »

hornet96 wrote: Tue Oct 13, 2020 10:57 am
pasadena wrote: Mon Oct 12, 2020 10:46 pm
The 7 days hold happens when you contribute outside money (maybe it depends on the bank, but I always had this issue from Ally).
This is not universally true. I transfer money from an outside bank every year, and am able to complete the backdoor process 1 to 2 days after initiating the transfer to the tIRA.
I know, and I don't understand it. But that's what worked for me last year.
I think the OP (and perhaps you) need to go into your bank settings to see if there are any "verification" types of issues that need to be resolved. I did encounter an issue a few years ago when I converted from the mutual fund platform to the brokerage platform, where I had to basically re-link my same bank account (which has not changed in many years).
Did that, no issue. I transfer money all the time from Ally to my brokerage and I never get a hold. But if I transfer that to my tIRA, it's on hold for 7 days before I can convert it to the Roth.
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hornet96
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Re: Pesky 7-day waiting period for backdoor Roth steps at Vanguard

Post by hornet96 »

pasadena wrote: Tue Oct 13, 2020 11:03 am
hornet96 wrote: Tue Oct 13, 2020 10:57 am
pasadena wrote: Mon Oct 12, 2020 10:46 pm
The 7 days hold happens when you contribute outside money (maybe it depends on the bank, but I always had this issue from Ally).
This is not universally true. I transfer money from an outside bank every year, and am able to complete the backdoor process 1 to 2 days after initiating the transfer to the tIRA.
I know, and I don't understand it. But that's what worked for me last year.
I think the OP (and perhaps you) need to go into your bank settings to see if there are any "verification" types of issues that need to be resolved. I did encounter an issue a few years ago when I converted from the mutual fund platform to the brokerage platform, where I had to basically re-link my same bank account (which has not changed in many years).
Did that, no issue. I transfer money all the time from Ally to my brokerage and I never get a hold. But if I transfer that to my tIRA, it's on hold for 7 days before I can convert it to the Roth.
Yeah, that's interesting. FWIW, I have the same bank account linked to my taxable brokerage and IRA accounts, and don't have any issues with delays in completing a backdoor Roth. Sometimes there are configuration issues on the back end that may not be visible to the user, so it might be worth a call to VG.
tesuzuki2002
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Re: Pesky 7-day waiting period for backdoor Roth steps at Vanguard

Post by tesuzuki2002 »

If I recall correctly. I deposited on a Friday into the TIRA. Converted to the Roth on Tuesday and it completely settled on Thursday.

4 working days total for the whole deal.

If you do it around the holiday or some other weird thing I could see an extra day of 2. I wouldn't worry about it.

Other than saying I would try to do it at a point in time when there is some market stability...
wbeaumo24
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Re: Pesky 7-day waiting period for backdoor Roth steps at Vanguard

Post by wbeaumo24 »

This happened to me as well over the course of the last week. I just completed backdoor Roths for me and my spouse for the first time. My funds took a few days to show as available (5 business days I believe). And even then it would not let me do the Roth conversion until the 7th day. Then I had to wait another day to invest my funds. And of course the market fell today after I finally got invested. However, mine was a situation where these were our first Vanguard accounts and therefore my first time to link my checking for the deposit. So, I'm hoping that "hold" will not be there when I do this next year.
home_body
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Re: Pesky 7-day waiting period for backdoor Roth steps at Vanguard

Post by home_body »

Bumping an old thread.

Have anyone figure out why some need to wait 7 days to convert from tIRA to rIRA and others don't? This year is my first year doing backdoor Roth. Wife and I DCA bi-weekly and really frustrated that we need to wait 7 days to convert on every contribution. Please shed some light. Thanks.
investmax
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Re: Pesky 7-day waiting period for backdoor Roth steps at Vanguard

Post by investmax »

home_body wrote: Wed Jun 23, 2021 8:39 pm Bumping an old thread.

Have anyone figure out why some need to wait 7 days to convert from tIRA to rIRA and others don't? This year is my first year doing backdoor Roth. Wife and I DCA bi-weekly and really frustrated that we need to wait 7 days to convert on every contribution. Please shed some light. Thanks.
Just to clarify, you are doing a DCA bi-weekly on backdoor roth. This means you contribute bi-weekly to traditional IRA and then convert that to Roth as soon as it settles. This means your initial hand-shaking between your bank and brokerage with tIRA is already done.

Also is both the Roth IRA and Traditional IRA with Vanguard?
home_body
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Re: Pesky 7-day waiting period for backdoor Roth steps at Vanguard

Post by home_body »

investmax wrote: Wed Jun 23, 2021 9:34 pm
home_body wrote: Wed Jun 23, 2021 8:39 pm Bumping an old thread.

Have anyone figure out why some need to wait 7 days to convert from tIRA to rIRA and others don't? This year is my first year doing backdoor Roth. Wife and I DCA bi-weekly and really frustrated that we need to wait 7 days to convert on every contribution. Please shed some light. Thanks.
Just to clarify, you are doing a DCA bi-weekly on backdoor roth. This means you contribute bi-weekly to traditional IRA and then convert that to Roth as soon as it settles. This means your initial hand-shaking between your bank and brokerage with tIRA is already done.

Also is both the Roth IRA and Traditional IRA with Vanguard?
After making a contribution to tIRA it takes 2 days to settle but it takes 7 days to allow to convert. Yes both tIRA and rIRA are with Vanguard.
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anon_investor
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Re: Pesky 7-day waiting period for backdoor Roth steps at Vanguard

Post by anon_investor »

home_body wrote: Wed Jun 23, 2021 9:44 pm
investmax wrote: Wed Jun 23, 2021 9:34 pm
home_body wrote: Wed Jun 23, 2021 8:39 pm Bumping an old thread.

Have anyone figure out why some need to wait 7 days to convert from tIRA to rIRA and others don't? This year is my first year doing backdoor Roth. Wife and I DCA bi-weekly and really frustrated that we need to wait 7 days to convert on every contribution. Please shed some light. Thanks.
Just to clarify, you are doing a DCA bi-weekly on backdoor roth. This means you contribute bi-weekly to traditional IRA and then convert that to Roth as soon as it settles. This means your initial hand-shaking between your bank and brokerage with tIRA is already done.

Also is both the Roth IRA and Traditional IRA with Vanguard?
After making a contribution to tIRA it takes 2 days to settle but it takes 7 days to allow to convert. Yes both tIRA and rIRA are with Vanguard.
Weird. My spouse and I have been do backdoor Roth at Vanguard for a few years now, ALWAYS only a 2 biz day wait to settle before we are able to convert.

Do you have a new account or something?
home_body
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Re: Pesky 7-day waiting period for backdoor Roth steps at Vanguard

Post by home_body »

anon_investor wrote: Wed Jun 23, 2021 9:56 pm
home_body wrote: Wed Jun 23, 2021 9:44 pm
investmax wrote: Wed Jun 23, 2021 9:34 pm
home_body wrote: Wed Jun 23, 2021 8:39 pm Bumping an old thread.

Have anyone figure out why some need to wait 7 days to convert from tIRA to rIRA and others don't? This year is my first year doing backdoor Roth. Wife and I DCA bi-weekly and really frustrated that we need to wait 7 days to convert on every contribution. Please shed some light. Thanks.
Just to clarify, you are doing a DCA bi-weekly on backdoor roth. This means you contribute bi-weekly to traditional IRA and then convert that to Roth as soon as it settles. This means your initial hand-shaking between your bank and brokerage with tIRA is already done.

Also is both the Roth IRA and Traditional IRA with Vanguard?
After making a contribution to tIRA it takes 2 days to settle but it takes 7 days to allow to convert. Yes both tIRA and rIRA are with Vanguard.
Weird. My spouse and I have been do backdoor Roth at Vanguard for a few years now, ALWAYS only a 2 biz day wait to settle before we are able to convert.

Do you have a new account or something?
Its not a new account. I’m still confused. I don’t know what the reason might be. I’ll have to reach out to Vanguard and find out. I’ll also have to try to see if transferring from my brokerage account to tIRA then convert to rIRA will avoid the 7 day holding period.
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whodidntante
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Re: Pesky 7-day waiting period for backdoor Roth steps at Vanguard

Post by whodidntante »

Since you asked about Fidelity, the wait there is one business day. No, buying a fund in traditional and then converting it to Roth is not the same as investing in a Roth in the first place. You'll owe taxes on any gains when the conversion happens.
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anon_investor
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Re: Pesky 7-day waiting period for backdoor Roth steps at Vanguard

Post by anon_investor »

home_body wrote: Wed Jun 23, 2021 10:07 pm
anon_investor wrote: Wed Jun 23, 2021 9:56 pm
home_body wrote: Wed Jun 23, 2021 9:44 pm
investmax wrote: Wed Jun 23, 2021 9:34 pm
home_body wrote: Wed Jun 23, 2021 8:39 pm Bumping an old thread.

Have anyone figure out why some need to wait 7 days to convert from tIRA to rIRA and others don't? This year is my first year doing backdoor Roth. Wife and I DCA bi-weekly and really frustrated that we need to wait 7 days to convert on every contribution. Please shed some light. Thanks.
Just to clarify, you are doing a DCA bi-weekly on backdoor roth. This means you contribute bi-weekly to traditional IRA and then convert that to Roth as soon as it settles. This means your initial hand-shaking between your bank and brokerage with tIRA is already done.

Also is both the Roth IRA and Traditional IRA with Vanguard?
After making a contribution to tIRA it takes 2 days to settle but it takes 7 days to allow to convert. Yes both tIRA and rIRA are with Vanguard.
Weird. My spouse and I have been do backdoor Roth at Vanguard for a few years now, ALWAYS only a 2 biz day wait to settle before we are able to convert.

Do you have a new account or something?
Its not a new account. I’m still confused. I don’t know what the reason might be. I’ll have to reach out to Vanguard and find out. I’ll also have to try to see if transferring from my brokerage account to tIRA then convert to rIRA will avoid the 7 day holding period.
What are you doing exactly? We always initiate a tIRA contribution from within Vanguard to be drawn upon our external checking account to the settlement account. After it is settled in the tIRA (2 biz days), we do the Roth conversion, the funds are then immediately available to invest.
home_body
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Re: Pesky 7-day waiting period for backdoor Roth steps at Vanguard

Post by home_body »

anon_investor wrote: Wed Jun 23, 2021 10:19 pm
home_body wrote: Wed Jun 23, 2021 10:07 pm
anon_investor wrote: Wed Jun 23, 2021 9:56 pm
home_body wrote: Wed Jun 23, 2021 9:44 pm
investmax wrote: Wed Jun 23, 2021 9:34 pm

Just to clarify, you are doing a DCA bi-weekly on backdoor roth. This means you contribute bi-weekly to traditional IRA and then convert that to Roth as soon as it settles. This means your initial hand-shaking between your bank and brokerage with tIRA is already done.

Also is both the Roth IRA and Traditional IRA with Vanguard?
After making a contribution to tIRA it takes 2 days to settle but it takes 7 days to allow to convert. Yes both tIRA and rIRA are with Vanguard.
Weird. My spouse and I have been do backdoor Roth at Vanguard for a few years now, ALWAYS only a 2 biz day wait to settle before we are able to convert.

Do you have a new account or something?
Its not a new account. I’m still confused. I don’t know what the reason might be. I’ll have to reach out to Vanguard and find out. I’ll also have to try to see if transferring from my brokerage account to tIRA then convert to rIRA will avoid the 7 day holding period.
What are you doing exactly? We always initiate a tIRA contribution from within Vanguard to be drawn upon our external checking account to the settlement account. After it is settled in the tIRA (2 biz days), we do the Roth conversion, the funds are then immediately available to invest.
I am doing the same but it won’t let me convert to my rIRA until the 7th day. On the 8th day it lands in my rIRA and i am able to trade.
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anon_investor
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Re: Pesky 7-day waiting period for backdoor Roth steps at Vanguard

Post by anon_investor »

home_body wrote: Wed Jun 23, 2021 10:30 pm
anon_investor wrote: Wed Jun 23, 2021 10:19 pm
home_body wrote: Wed Jun 23, 2021 10:07 pm
anon_investor wrote: Wed Jun 23, 2021 9:56 pm
home_body wrote: Wed Jun 23, 2021 9:44 pm

After making a contribution to tIRA it takes 2 days to settle but it takes 7 days to allow to convert. Yes both tIRA and rIRA are with Vanguard.
Weird. My spouse and I have been do backdoor Roth at Vanguard for a few years now, ALWAYS only a 2 biz day wait to settle before we are able to convert.

Do you have a new account or something?
Its not a new account. I’m still confused. I don’t know what the reason might be. I’ll have to reach out to Vanguard and find out. I’ll also have to try to see if transferring from my brokerage account to tIRA then convert to rIRA will avoid the 7 day holding period.
What are you doing exactly? We always initiate a tIRA contribution from within Vanguard to be drawn upon our external checking account to the settlement account. After it is settled in the tIRA (2 biz days), we do the Roth conversion, the funds are then immediately available to invest.
I am doing the same but it won’t let me convert to my rIRA until the 7th day. On the 8th day it lands in my rIRA and i am able to trade.
That is crazy! Are you on the brokerage or mutual fund platform? We both are on the brokerage platform.
home_body
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Re: Pesky 7-day waiting period for backdoor Roth steps at Vanguard

Post by home_body »

anon_investor wrote: Wed Jun 23, 2021 10:32 pm
home_body wrote: Wed Jun 23, 2021 10:30 pm
anon_investor wrote: Wed Jun 23, 2021 10:19 pm
home_body wrote: Wed Jun 23, 2021 10:07 pm
anon_investor wrote: Wed Jun 23, 2021 9:56 pm

Weird. My spouse and I have been do backdoor Roth at Vanguard for a few years now, ALWAYS only a 2 biz day wait to settle before we are able to convert.

Do you have a new account or something?
Its not a new account. I’m still confused. I don’t know what the reason might be. I’ll have to reach out to Vanguard and find out. I’ll also have to try to see if transferring from my brokerage account to tIRA then convert to rIRA will avoid the 7 day holding period.
What are you doing exactly? We always initiate a tIRA contribution from within Vanguard to be drawn upon our external checking account to the settlement account. After it is settled in the tIRA (2 biz days), we do the Roth conversion, the funds are then immediately available to invest.
I am doing the same but it won’t let me convert to my rIRA until the 7th day. On the 8th day it lands in my rIRA and i am able to trade.
That is crazy! Are you on the brokerage or mutual fund platform? We both are on the brokerage platform.
Yeah tell me about it, I’m still struggling to understand. My tIRA is a brokerage but rIRA is mutual fund only.
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anon_investor
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Re: Pesky 7-day waiting period for backdoor Roth steps at Vanguard

Post by anon_investor »

home_body wrote: Wed Jun 23, 2021 10:44 pm
anon_investor wrote: Wed Jun 23, 2021 10:32 pm
home_body wrote: Wed Jun 23, 2021 10:30 pm
anon_investor wrote: Wed Jun 23, 2021 10:19 pm
home_body wrote: Wed Jun 23, 2021 10:07 pm

Its not a new account. I’m still confused. I don’t know what the reason might be. I’ll have to reach out to Vanguard and find out. I’ll also have to try to see if transferring from my brokerage account to tIRA then convert to rIRA will avoid the 7 day holding period.
What are you doing exactly? We always initiate a tIRA contribution from within Vanguard to be drawn upon our external checking account to the settlement account. After it is settled in the tIRA (2 biz days), we do the Roth conversion, the funds are then immediately available to invest.
I am doing the same but it won’t let me convert to my rIRA until the 7th day. On the 8th day it lands in my rIRA and i am able to trade.
That is crazy! Are you on the brokerage or mutual fund platform? We both are on the brokerage platform.
Yeah tell me about it, I’m still struggling to understand. My tIRA is a brokerage but rIRA is mutual fund only.
Maybe that is why? We are doing brokerage tIRA to brokerage Roth IRA.
home_body
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Re: Pesky 7-day waiting period for backdoor Roth steps at Vanguard

Post by home_body »

anon_investor wrote: Wed Jun 23, 2021 10:45 pm
home_body wrote: Wed Jun 23, 2021 10:44 pm
anon_investor wrote: Wed Jun 23, 2021 10:32 pm
home_body wrote: Wed Jun 23, 2021 10:30 pm
anon_investor wrote: Wed Jun 23, 2021 10:19 pm

What are you doing exactly? We always initiate a tIRA contribution from within Vanguard to be drawn upon our external checking account to the settlement account. After it is settled in the tIRA (2 biz days), we do the Roth conversion, the funds are then immediately available to invest.
I am doing the same but it won’t let me convert to my rIRA until the 7th day. On the 8th day it lands in my rIRA and i am able to trade.
That is crazy! Are you on the brokerage or mutual fund platform? We both are on the brokerage platform.
Yeah tell me about it, I’m still struggling to understand. My tIRA is a brokerage but rIRA is mutual fund only.
Maybe that is why? We are doing brokerage tIRA to brokerage Roth IRA.
At first that is what i thought, but my wife’s tIRA and rIRA are both brokerage. I might have to see if the workaround will work as one of the previous poster have done. Thanks.
ryman554
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Re: Pesky 7-day waiting period for backdoor Roth steps at Vanguard

Post by ryman554 »

whodidntante wrote: Wed Jun 23, 2021 10:10 pm Since you asked about Fidelity, the wait there is one business day. No, buying a fund in traditional and then converting it to Roth is not the same as investing in a Roth in the first place. You'll owe taxes on any gains when the conversion happens.
And yet, when I *fund* the tIRA, I need to wait for a week (or so, could be 4 business days, but that's almost a week!) for the money "to be available for withdrawal" before I can convert to a roth online. Note, money is coming from external checking account, but I've been with Fido over 10 years and have well over $1M in assets with them.

Alternatively, I could invest into a fund *immediately* (post business day, really). Are you saying a transfer in kind is possible? If so, how does one accomplish that online?
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JamesSFO
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Re: Pesky 7-day waiting period for backdoor Roth steps at Vanguard

Post by JamesSFO »

Hmm, I've always been able to convert it either the very next day or the day after (e.g. max 1 business day), I think the limit is on transferring it out of Vanguard. I did it on Jan 2 and 3rd this year.
Silk McCue
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Re: Pesky 7-day waiting period for backdoor Roth steps at Vanguard

Post by Silk McCue »

home_body wrote: Wed Jun 23, 2021 10:44 pm
Yeah tell me about it, I’m still struggling to understand. My tIRA is a brokerage but rIRA is mutual fund only.
Sounds like you should move the rIRA to brokerage. No good reason that I know of to leave it in a legacy system that is going away.

Cheers
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hornet96
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Re: Pesky 7-day waiting period for backdoor Roth steps at Vanguard

Post by hornet96 »

ryman554 wrote: Thu Jun 24, 2021 8:22 am
whodidntante wrote: Wed Jun 23, 2021 10:10 pm Since you asked about Fidelity, the wait there is one business day. No, buying a fund in traditional and then converting it to Roth is not the same as investing in a Roth in the first place. You'll owe taxes on any gains when the conversion happens.
And yet, when I *fund* the tIRA, I need to wait for a week (or so, could be 4 business days, but that's almost a week!) for the money "to be available for withdrawal" before I can convert to a roth online.
Have you actually tried to convert to a Roth, or do you see that message and never actually try? I think that message is only to tell you that you can't withdraw the money from Vanguard for 7 days. Is that maybe where the confusion lies?
deltaneutral83
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Re: Pesky 7-day waiting period for backdoor Roth steps at Vanguard

Post by deltaneutral83 »

Traveller wrote: Sun Oct 11, 2020 8:02 pm
anon_investor wrote: Sun Oct 11, 2020 7:48 pm Where did this 7 day holding period come from. I do backdoor Roth at Vanguard and never experienced this.
I agree. I've done this many times without a 7 day wait period. My process is just as the OP described. I buy a money market fund in my non-deductible traditional IRA (with that money coming from a linked bank account at another institution). The next day I exchange that money market fund to an equity fund in my Roth IRA. I DO recall having a notice window pop-up saying I may not be able to withdraw those funds for a period of time, but it does not prevent the back door process.
There is no separate "non deductible" traditional IRA, correct? You are essentially just depositing into your tIRA as non deductible on your tax forms, and then converting to Roth?
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whodidntante
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Re: Pesky 7-day waiting period for backdoor Roth steps at Vanguard

Post by whodidntante »

ryman554 wrote: Thu Jun 24, 2021 8:22 am
whodidntante wrote: Wed Jun 23, 2021 10:10 pm Since you asked about Fidelity, the wait there is one business day. No, buying a fund in traditional and then converting it to Roth is not the same as investing in a Roth in the first place. You'll owe taxes on any gains when the conversion happens.
And yet, when I *fund* the tIRA, I need to wait for a week (or so, could be 4 business days, but that's almost a week!) for the money "to be available for withdrawal" before I can convert to a roth online. Note, money is coming from external checking account, but I've been with Fido over 10 years and have well over $1M in assets with them.

Alternatively, I could invest into a fund *immediately* (post business day, really). Are you saying a transfer in kind is possible? If so, how does one accomplish that online?
I make the contribution from a Fidelity CMA account where the funds are available. The next business day, I can convert to Roth. Fidelity CMA funds availability seems to be on the fourth business day following an ACH pull, or as soon as an ACH push hits the account. So it is typically faster to push from outside.
ryman554
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Re: Pesky 7-day waiting period for backdoor Roth steps at Vanguard

Post by ryman554 »

hornet96 wrote: Thu Jun 24, 2021 9:26 am
ryman554 wrote: Thu Jun 24, 2021 8:22 am
whodidntante wrote: Wed Jun 23, 2021 10:10 pm Since you asked about Fidelity, the wait there is one business day. No, buying a fund in traditional and then converting it to Roth is not the same as investing in a Roth in the first place. You'll owe taxes on any gains when the conversion happens.
And yet, when I *fund* the tIRA, I need to wait for a week (or so, could be 4 business days, but that's almost a week!) for the money "to be available for withdrawal" before I can convert to a roth online.
Have you actually tried to convert to a Roth, or do you see that message and never actually try? I think that message is only to tell you that you can't withdraw the money from Vanguard for 7 days. Is that maybe where the confusion lies?
Yes, I try. Online, they won't let me do it until funds are fully available. Recall, this is Fido, OP is complaining about similar from Vanguard.
ryman554
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Re: Pesky 7-day waiting period for backdoor Roth steps at Vanguard

Post by ryman554 »

whodidntante wrote: Thu Jun 24, 2021 2:14 pm
ryman554 wrote: Thu Jun 24, 2021 8:22 am
whodidntante wrote: Wed Jun 23, 2021 10:10 pm Since you asked about Fidelity, the wait there is one business day. No, buying a fund in traditional and then converting it to Roth is not the same as investing in a Roth in the first place. You'll owe taxes on any gains when the conversion happens.
And yet, when I *fund* the tIRA, I need to wait for a week (or so, could be 4 business days, but that's almost a week!) for the money "to be available for withdrawal" before I can convert to a roth online. Note, money is coming from external checking account, but I've been with Fido over 10 years and have well over $1M in assets with them.

Alternatively, I could invest into a fund *immediately* (post business day, really). Are you saying a transfer in kind is possible? If so, how does one accomplish that online?
I make the contribution from a Fidelity CMA account where the funds are available. The next business day, I can convert to Roth. Fidelity CMA funds availability seems to be on the fourth business day following an ACH pull, or as soon as an ACH push hits the account. So it is typically faster to push from outside.
Seems similar, then, since I'm ACH pulling directly into my tIRA. I take it you can't transfer between CMA and tIRA until funds are fully available?
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Traveller
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Re: Pesky 7-day waiting period for backdoor Roth steps at Vanguard

Post by Traveller »

deltaneutral83 wrote: Thu Jun 24, 2021 9:30 am
Traveller wrote: Sun Oct 11, 2020 8:02 pm
anon_investor wrote: Sun Oct 11, 2020 7:48 pm Where did this 7 day holding period come from. I do backdoor Roth at Vanguard and never experienced this.
I agree. I've done this many times without a 7 day wait period. My process is just as the OP described. I buy a money market fund in my non-deductible traditional IRA (with that money coming from a linked bank account at another institution). The next day I exchange that money market fund to an equity fund in my Roth IRA. I DO recall having a notice window pop-up saying I may not be able to withdraw those funds for a period of time, but it does not prevent the back door process.
There is no separate "non deductible" traditional IRA, correct? You are essentially just depositing into your tIRA as non deductible on your tax forms, and then converting to Roth?
Correct. Poor wording on my part.
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