Hi. Hopefully a simple question, but not one that I’ve been able to find an answer to so easily. If I want to make a backdoor Roth contribution, do I need to open both a traditional and Roth IRA, or does a single account work for both? It’s my first time being able to look at these strategies, so appreciate any guidance or direction, even if to another subreddit. Thank you.
Posted by Mordot11
2 Comments
Yea. Open both – deposit into traditional – wait for money to settle – move to roth
Open a new Traditional IRA account and a new Roth account, even if you have other IRA accounts. (I recommend you name each account to indicate this is the sole purpose for its existence. You can use the same 2 accounts next year if you fund a backdoor Roth again.) Transfer your entire annual IRA contribution into the new Trad IRA account. Wait a few days for it to settle. Transfer no more than the annual contribution limit into the Backdoor Roth account. (there may be pennies left, but this makes everything clean. If there are pennies, next year transfer your max contribution minus the pennies into the Trad account. Don’t use either account for any other purpose. Rinse and repeat. Is this necessary? Maybe not, but it makes it very clear for you, your auditor and your heirs.