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I'm disqualified from contributing to a Roth IRA. My uninformed speculation on why Roth IRA income caps and max annual contribution limits exist is that it's th
by tracer4201 8y ago
I'm disqualified from contributing to a Roth IRA. My uninformed speculation on why Roth IRA income caps and max annual contribution limits exist is that it's the sake of tax revenue.
- stouset 8y agoIn practical terms, you’re not. Contribute to a traditional IRA. Roll it over immediately into a Roth IRA. You can do this regardless of how large your income is.
- votepaunchy 8y agoNote: unless you have existing savings in a traditional IRA.
- stouset 8y agoYeah, this is an important caveat. If you have existing IRA funds, roll them into a 401(k) first.
- garmaine 8y agoWait before rolling it over, probably at least 30 days. If you do it immediately it is considered a single transaction and illegal. If audited they’ll make you reclassify it and pay penalties.
- sokoloff 8y agoAny reference or citation for that? I have never heard that advice and a quick googling doesn't turn anything up either. I've generally heard the opposite advice (convert the next day to minimize exposure to [undesired] gains/losses while a traditional IRA).
- garmaine 8y agoThe google term you want is “structured transaction.” Any sequence of legal transactions clearly designed to do an illegal thing when done directly is to be treated the same as if it had been done as a single step. The point of waiting e.g. 30 days is EXACTLY that it exposes you to gains/losses and you can rightly say the two actions are no longer connected.
- kuhhk 8y agoInteresting, I've always been informed that waiting one day is sufficient. But, didn't the backdoor roth get closed in the recent tax change?
- stouset 8y agoIt didn’t, and doing an immediate rollover is not considered structuring since rolling over IRA contributions into a Roth is explicitly legal.
- stouset 8y agoYou are confused as to the definition of a “structured transaction”. There is no issue with performing an immediate rollover. Rolling over IRA contributions into a Roth is not only legal, it is explicitly endorsed by the IRS.