Well, the first year I did the back door Roth, waited to do the conversion and had a small amount of gain to report on our taxes. It was kinda of a headache to work through the forms on TurboTax. Decided from then on to do like Ethan and convert the same day, avoiding additional income to report. I see no benefit waiting to convert.
The downside is not $20 in tax, it's 1 month of lost growth. Still probably not life changing but I'm a fan of same day. No hesitation with timing, no missing out on growth days, no tax. I seem to recall a blessing of a step transaction in some IRS letter somewhere once as well.
good video. we typically make our non deductible contribution for the prior year at the same time we do our taxes in April. It therefore goes immediately on the tax return, however since a Roth conversion needs to be done by Dec 31st, the conversion goes on the following years tax return, thus we don't worry about any time elapsing.
I don't see the usefulness of "respecting" step B (tIRA)…?
Ours is done through Vanguard, which requires a few days to settle in tIRA before funds are allowed into Roth IRA. This wait is not my choosing; if I could, would just transfer immediately from A to B to C.
Fantastic video, as always! Just as an idea for a future video, it would be nice to get your take on the Vanguard "BETR" model for Roth conversions…
Well, the first year I did the back door Roth, waited to do the conversion and had a small amount of gain to report on our taxes. It was kinda of a headache to work through the forms on TurboTax. Decided from then on to do like Ethan and convert the same day, avoiding additional income to report. I see no benefit waiting to convert.
The downside is not $20 in tax, it's 1 month of lost growth. Still probably not life changing but I'm a fan of same day. No hesitation with timing, no missing out on growth days, no tax. I seem to recall a blessing of a step transaction in some IRS letter somewhere once as well.
good video. we typically make our non deductible contribution for the prior year at the same time we do our taxes in April. It therefore goes immediately on the tax return, however since a Roth conversion needs to be done by Dec 31st, the conversion goes on the following years tax return, thus we don't worry about any time elapsing.
I don't see the usefulness of "respecting" step B (tIRA)…?
Ours is done through Vanguard, which requires a few days to settle in tIRA before funds are allowed into Roth IRA. This wait is not my choosing; if I could, would just transfer immediately from A to B to C.
Merry Christmas Sean. Great stuff as always.