Ceiling on converting tIRA to Roth IRA

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neitherherenorthere
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Joined: Fri Jul 27, 2018 3:28 pm

Ceiling on converting tIRA to Roth IRA

Post by neitherherenorthere »

I opened a brand new Roth IRA account with Vanguard, then moved my tIRA account balance of $6,300 to the Roth account. Did I make a mistake by exceeding the annual backdoor Roth IRA contribution of $6,000?

I am planning on paying the taxes due from the conversion of the tIRA balance where the original one-time contribution was made with pretax dollars.

My plan from now on is to do a yearly $6,000 backdoor IRA contribution using the traditional account and then immediately moving to the Roth account. I just tripped over the initial step when I emptied the tIRA bucket so I can continue contributing after-tax dollars only.
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anon_investor
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Re: Ceiling on converting tIRA to Roth IRA

Post by anon_investor »

neitherherenorthere wrote: Tue Jul 27, 2021 3:09 pm I opened a brand new Roth IRA account with Vanguard, then moved my tIRA account balance of $6,300 to the Roth account. Did I make a mistake by exceeding the annual backdoor Roth IRA contribution of $6,000?

I am planning on paying the taxes due from the conversion of the tIRA balance where the original one-time contribution was made with pretax dollars.

My plan from now on is to do a yearly $6,000 backdoor IRA contribution using the traditional account and then immediately moving to the Roth account. I just tripped over the initial step when I emptied the tIRA bucket so I can continue contributing after-tax dollars only.
There is no limit to how much you convert to Roth, the annual limit is how much you can directly contribute to your IRA accounts.
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FiveK
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Re: Ceiling on converting tIRA to Roth IRA

Post by FiveK »

+1 to anon_investor's reply.

If the $6300 was from contributions made before 2021 (and any gains on those), you can still make a $6000 contribution for 2021. That applies whether you use the backdoor Roth process or not.
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Fortune
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Re: Ceiling on converting tIRA to Roth IRA

Post by Fortune »

Is there any income ceiling for converting tIRA to RIRA.
What should be age considerations for such conversion.
02nz
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Re: Ceiling on converting tIRA to Roth IRA

Post by 02nz »

Fortune wrote: Tue Jul 27, 2021 8:32 pm Is there any income ceiling for converting tIRA to RIRA.
No.
Fortune wrote: Tue Jul 27, 2021 8:32 pm What should be age considerations for such conversion.
Can you be more specific? Better yet, start a separate thread with your question(s). The OP's question seems to have to do mainly with the backdoor Roth, which technically involves a Roth conversion, but it's a bit different in that most/all of the money was already taxed.
Topic Author
neitherherenorthere
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Joined: Fri Jul 27, 2018 3:28 pm

Re: Ceiling on converting tIRA to Roth IRA

Post by neitherherenorthere »

FiveK wrote: Tue Jul 27, 2021 7:04 pm If the $6300 was from contributions made before 2021 (and any gains on those), you can still make a $6000 contribution for 2021. That applies whether you use the backdoor Roth process or not.
FiveK, you anticipated my follow up question. I will contribute then convert the $6,000 for 2021 because the $6,300 is the result of a long ago, one time contribution.

Thanks to all who replied! I have been learning, saving and investing steadily thanks to this forum and the wiki page.
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grabiner
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Re: Ceiling on converting tIRA to Roth IRA

Post by grabiner »

Fortune wrote: Tue Jul 27, 2021 8:32 pm Is there any income ceiling for converting tIRA to RIRA.
What should be age considerations for such conversion.
The income limit was removed in 2010.

Age is only an indirect consideration. You should make the conversion when you are at the lowest possible marginal tax rate, since this minimizes the fraction of the IRA you lose to taxes. Therefore, it is often desirable to make this type of conversion after retiring, and before RMDs from your 401(k)/IRA and Social Security will put you in a higher tax bracket. By converting (or by spending down the traditional 401(k)/IRA rather than the Roth), you reduce future RMDs as well as minimizing the tax.

But you can get the same benefit if you make the conversion while young, in a year that you happen to be in a low tax bracket (because you were unemployed or in school part of the year, moved to a no-tax state, have large deductions, etc.).
Wiki David Grabiner
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