By Dr. Jim Dahle, WCI Founder
Every year or two, Vanguard changes its process slightly. If you understand the Backdoor Roth IRA, these little tweaks are no big deal. If it's your first time, they can be confusing. We periodically update this post, but if you're doing this process don't be surprised if it looks a little different from what you see here. The most recent update uses screenshots from 2025. Here's all you need to know to do a Backdoor Roth IRA with Vanguard:
Step 1: Contribute to Vanguard Traditional IRA
First, go to your traditional IRA account and click on “Transact”. That will give you a drop down menu where one of the choices is “Contribute to IRA.” Click on that.
This will bring you to this page.
It shows you contributions made so far for years that are eligible still for contributions. You can see we previously maxed out the 2024 contribution, so all that is left is a 2025 contribution. And notice also that it is just going into cash (the federal money market (settlement fund) so it doesn't have a loss in between the contribution and conversion step. Then you need to choose where the money is coming from.
You'll have multiple choices, including all the banks you've linked to this account, sending Vanguard a check, exchanging from another fund, or using your settlement fund. If you can, use the settlement fund in your brokerage account. It will decrease the amount of time for money to “settle” and allow you to complete the Backdoor Roth IRA process a few days faster. This is a bigger deal at Fidelity than at Vanguard, but I've had to wait up to a week between contribution and conversion at Vanguard before when I used money from my bank account to make the IRA contribution.
You'll likely end up at this screen next. In this case, we took the money out of the money market (settlement) fund in our brokerage account, so $7,000 from there and hit continue.
That all looks okay, so hit continue.
Hit accept here and it brings you to the review and submit page.
Check it over and hit submit and you get the confirmation page.
Congratulations! You've made a contribution to a traditional IRA and left the money sitting in cash. At Vanguard, you're done for the day. If you used your settlement fund, come back tomorrow (or the next business day). If you used your bank account, come back in a few days after the contribution “settles” to do step 2.
Step 2: Convert Vanguard Traditional IRA to Roth IRA
So on Day 2, you go to your traditional IRA and hit the “Convert to Roth IRA” button.
There are other ways you can get to the same place, like going to the “exchange funds” link (on the buy and sell menu). But this way seems easiest. You'll then come to a screen that looks like this.
This page is just a warning you don't need to worry about. Hit the “Start my Roth conversion” button and you'll go to the next page.
There's a lot of good stuff on this page, but you can ignore it all if you're a typical white coat investor doing your annual Backdoor Roth IRA. Hit continue.
I love this page. It doesn't ask you if you want to withhold taxes (you don't), it just has you agree not to. Perfect. (You're not going to owe taxes on the conversion of a non-deductible contribution anyway and if they did it would just mean you ended up with less in your Roth IRA and had to wait for your tax refund to get the money back.) Hit “I agree” and then “Continue” and go to the next page.
I like this page too. It's Vanguard's new look and has a nice bar at the top to track your progress through the Roth conversion. Hit continue and move on to the next page. Note the page may give you a warning that looks like this:
That just means the money in your traditional IRA hasn't settled yet. Come back in a day or three when it has. If it is settled, the next page will look like this.
If you're doing your Backdoor Roth IRA process right, you just convert the entire account because all that is in there is this year's IRA contribution. Don't worry about the tax warning. Remember some Roth conversions are taxable, but not in the Backdoor Roth IRA process. Hit continue and go to the next page.
This page seems a little odd when you only have one Roth IRA, but I guess it's necessary. Hit continue.
This is another odd page, but I guess it's an IRS requirement. I don't need a notice saying they're not going to withhold taxes that aren't owed anyway but you can get one if you want. Then hit continue.
This is your review page to double check before submitting the order. The astute observer will notice this form says the conversion amount is $8,000. That's because I used screenshots from both Katie's and my Roth conversion this year and one of us turns 50 this year, and so is eligible for a “$1,000” catch-up contribution for the first time. Your conversion amount should be about the same as your contribution amount. If you have a few dollars extra in there from earnings while sitting in the traditional IRA, convert those too. You'll owe tax on those few dollars but you can afford it I'm sure.
This is just the confirmation page. Go ahead and hit exit. Note that it says you may have to wait 2 days for the conversion to be complete. That wasn't the case for me. The money was immediately available to invest, so I did. Don't forget to invest your Roth IRA money or it'll just sit in cash.
Step 3: Choose Vanguard Roth IRA Investments
Go back to the page listing all your accounts and click on the Roth IRA account.
Click on “Transact” and then “Buy Vanguard mutual fund” (or whatever you want to invest in) and you'll go to a page where you can do so. Mine looked like this.
As you can see, this entire Roth IRA is already invested in the Vanguard Real Estate Index Fund, so this new contribution will go there as well. I just hit “Buy” and it takes me to this page.
So I put in $8,000 ($7,000 when doing Katie's Roth IRA) and hit “Continue order” and on to the next page.
Once more, you just have to hit “Preview order” and move on to the next page. I like the new section here where they update you on where you stand for this year's and last year's IRA contributions.
And the confirmation page for your trade/order.
That's it, you're done until next year. Don't forget to do a spousal Backdoor Roth IRA if available.
The process will be slightly different at Fidelity, Schwab, and other IRA custodians, but the basic steps will remain the same.
If you have a question about the Backdoor Roth IRA and not Vanguard specifically, you should FIRST read this very in-depth Backdoor Roth IRA Tutorial before asking your question in the comments below. I promise you there is a 99% chance your question is answered there.
What do you think? Do you do your Backdoor Roth IRA(s) at Vanguard each year? What problems have you run into? Any questions? Comment below!
beyond helpful thank you
This is very helpful.
Quick question on Step 4: if I am converting from Traditional to Roth which was already invested that include gains other than my after-tax contributions (assuming I will pay taxes on gains)- do I still click on “I do not elect” and ” do not send a tax withholding notice”?
Thank you!
Yes, don’t have anything withheld. Just have that tax paid with other money.
I am 86 yrs. old and have no earned income now so the only way I can add money to my Roth is thru the backdoor approach. In Nov. of 2021 I did the Backdoor Roth transferring 10M from my Traditional IRA into my Roth IRA. When preparing my taxes for 2021, which lines on Form 8606 must be completed? This is the first time I did a backdoor conversion.
That’s not a Backdoor Roth IRA. That’s a Roth conversion. While there are similarities (they both involve a Roth conversion), they are not the same thing. This post is for you:
https://www.whitecoatinvestor.com/roth-conversions/
I don’t know if you have any non-deductible money in there, but if you don’t, the only part of 8606 you would fill out for a Roth conversion is Part II, lines 16-18.
I put $6,000 into a traditional IRA account. I made the mistake of purchasing shares with VTSAX and will be doing the backdoor conversion from that instead of the settlement fund. Say I make gains on the 6K. Can I just choose to convert 6k to avoid paying taxes on the gains?
No, convert the whole thing and pay taxes on the gains or you’ll end up getting pro-rated which is worse.
Thanks for an excellent explanation!
My wife and I exceed the Roth IRA income limits and our interested in doing the back door roth for the 1st time. Found this comment on Motley Fool and we’re concerned about our prior traditional IRA accounts (contributed at least 10 years ago).
“if you have additional traditional IRA assets, then there’s another problem. The IRS won’t let you treat the conversion as coming solely from the non-deductible IRA. Instead you’ll have to include a portion of the conversion in your taxable income, based on the pro-rata value of your nondeductible and other traditional IRA assets. That’s generally not desirable, so if you have extensive retirement assets in deductible traditional IRAs, you should think twice before trying to do a backdoor Roth.”
Can you please help explain this impact? We are not deducting anything from our old traditional IRA’s so is this an issue for us?
thank you.
It’s called the pro-rata rule. More info here:
https://www.whitecoatinvestor.com/backdoor-roth-ira-tutorial/
Basically, you need to either convert that entire old traditional IRA or roll it over into a 401(k), or the conversion step of your Backdoor Roth IRA process will be pro-rated, and you don’t want that.
If I roll it into a 401(k), does it go towards the limits of my annual contribution? In other words, can I only roll over more than $20,500?
No limits on rollover amounts. They do not count toward your annual contribution limit.
Why is my 1099-R form throwing off my tax person?? They are saying I need to pay taxes on 12000. Any recourses I can provide to them to point them in the right direction?
Thanks
Because they don’t know how to deal with this. Point out to them that isn’t taxable income and make them fix it or hire someone else. Why do you have to teach them how to do their job? (Don’t feel too bad. I had to teach my accountant’s firm how to do it too and they still screwed it up again and then had to refile my taxes.) Pointing out that box 2b is checked might help.
I don’t have a Vanguard account . My 401k through employer is with Merrill Lynch.
1. Can I open a Vanguard account just to do a backdoor Roth IRA, or should I attempt figuring out the process with ML instead?
2. If funds are limited and I could only do one or the other, what is more beneficial: Roth conversion or backdoor Roth? I max our my 401k as Roth, and my employer puts in 10% which is adding up to quite a big amount over time and could be converted.
1. Vanguard
2. If funds are limited, why are you doing a Roth 401(k)? But at any rate, I’d do a Backdoor Roth of the time (more Roth with no tax cost) versus a Roth conversion of tax-deferred money (more Roth with a tax cost).
Do you have to pay double taxes on the backdoor IRA when done in this manner:
1. Contribute money into Traditional IRA without the tax benefit since I am over the income limit for that benefit. (1st tax)
2. When moving from the Traditional IRA to the Roth, assuming I do move the money through the settlement fund, will my $6k be taxed again? (2nd tax)
Thanks for your help!
No, there should be no tax due on the conversion of after-tax money.
I’m lucky enough to be doing my first back door Roth. I just wanted to say thank you for the amazing walkthrough here. This is making something I dreaded actually quite fast and straight forward.
Just curious, do you do your own taxes or have a firm do them? If I did what LD did above does all that get handled on the Form 8606? Thanks
I did my own taxes for many years. Last year I had an accountant do them (who promptly screwed up Form 8606 twice). Hopefully they do it right this year.
I recall some of your earlier writings and podcasts mentioning Vanguard did not allow the backdoor Roth. Would you clarify if that has changed recently?
I have no idea what you’re talking about, but I don’t recall ever saying or writing that, much less it ever being true. Vanguard’s individual 401(k) didn’t allow IRA rollovers into the 401(k) for a long time. Their individual 401(k) doesn’t have a mega Backdoor Roth IRA option either. Maybe you were thinking of one of those things.
Once you put money into this Roth IRA Brokerage account, you may not withdraw any of it until retirement age without being penalized, correct? I am trying to figure out if the Target Retirement Funds only allow you to withdraw money at retirement age or if you can withdraw anytime from those. I have target retirement funds within my Roth IRA brokerage account.
when the account is converted to Roth, can i buy stocks instead of a vanguard fund? is that an option for me?
thank you so much for putting a nice guide together, agree the customer service is below par at vanguard. They have improved their app recently hopefully its sign of update to the website is coming.
You could, but I wouldn’t recommend it.
https://www.whitecoatinvestor.com/uncompensated-risk/
Thank you makes sense, loved the linked article.
Hello,
Once I did the conversion of the $6,000 from traditional to ROTH the amount converted became $6000.03 due to a dividend. Will this 3 cents cause an issue with taxes??
If so, what should be my next step?
No.
Nothing.
https://www.whitecoatinvestor.com/pennies-and-the-backdoor-roth-ira/
Do I need to have a Roth IRA beforehand in order to do a IRA conversion?
I just opened a Traditional IRA
thank you
You can open a Roth IRA at any time, but yea, you’ll need one to do a conversion. The money has to move into a Roth IRA for it to be a Roth IRA conversion.
Is anyone else having trouble with Form 1099-R using Turbo Tax? I entered the amount on the form, checked box 2b and it’s saying I owe takes on $12K. I’m not tracking why Turbo Tax thinks this or how to resolve it.
You know about this, right?
https://www.whitecoatinvestor.com/how-to-report-a-backdoor-roth-ira-on-turbotax/
Perfect! Just what I needed. I have to say – your posts are AMAZING. Specific, detailed, and practical. This did the trick, and I figured out that I need to file an amended 8606 because I did not have the correct total basis in line 2 on that form in 2020 (carrying over from 2019). I had two years worth of after tax contributions to my IRA before I converted it to a Roth IRA. So, onwards and upwards. Thank you!
Hello
I’m 64 yrs, have Roth account at Mas Mutual . But I haven’t contributed years with a reason.
So I want to take place backdoor today 4/4/22
By opening accounts at Vangur.
1. Is it not too late?
2. I have to open two new accounts for ira money market AND Roth ira at Vanguard ?
3. Can I have Roth ira account at Vangurd besides mas mutual?
1. No.
2. Yes. If you want to do the Backdoor Roth IRA process at Vanguard, you will need both a traditional and a Roth IRA there.
3. Yes. But the total IRA contribution limit for all accounts is $7K for 2021 and $7K for 2022.
Make sure you understand the pro-rata rule.
https://www.whitecoatinvestor.com/backdoor-roth-ira-tutorial/
Hello,
So I have 35k in a traditional IRA with Vanguard, all invested in VTSAX stock. Due to marriage, I’d like to pursue the backdoor Roth IRA moving forward.
Sadly, I found out that my company 403b will NOT accept traditional IRA rollovers.
So is the best option for me: To move all this $ to my Roth IRA first, then contribute an additional $6000 to the traditional IRA, then convert that $6000 to the Roth IRA, and finally invest all the money that’s sitting in my Roth?
Follow-up Q: will I be penalized in having a traditional IRA account open with $0 sitting in it?
Thanks so much for any guidance!
Maria
Best? Dunno. It’s certainly one option though. It’ll probably cost you $10-15K in taxes though so make sure you can afford that if you decide to convert the whole thing. Another option is to not do BD Roth IRAs.
There’s no penalty at any institution I know of or use to have $0 in your traditional IRA. There’s probably some dirtbag institution out there that may charge you a fee though.
True. I could just not pursue it altogether and continue contributing non-deductible amounts my Traditional IRA every year instead (but then pay taxes on any gains that I withdraw after 60 years old)
Definitely going to mull it over some more and discuss with my spouse.
Thanks again for all your help!!
Maria
The audience here may also wanna look at this. Nicely explained!
https://thefinancebuff.com/the-backdoor-roth-ira-a-complete-how-to.html
Hi,
So I was interested in doing my very first ever backdoor roth for my husband and I but was reading that the deadline was April 15.
Does this mean I need to wait all the way until next year to contribute to an IRA?
Thanks again for all of your help and everything that you do!
Natalie
You can contribute to your 2022 traditional IRA now and then convert it to a Roth IRA. But you can no longer make a 2021 IRA contribution.
I have a sizeable amount in a rollover/traditional IRA that was rolled over from previous employer, a 401K from my current employer, and Roth IRA from when I was under the income limit. I am now over the Roth direct contribution income limit. I have self invested in both my Roth and Traditionals. The Roth and Traditional, both with Fidelity. New 401k from new employer, different firm
Confirming -In order to do the backdoor, do I need to
1. Sell all the investments in Rollover, to convert to Cash
a. Would this come with a lot of tax liabilities..? is there a better way to do this?
2. Open Individual 401K with same company my Roth is in
3. Roll over the cash from step 1, to this new 401K ..?
4. Select my 401k Investments
5. Jan 2nd contribute to this Rollover IRA, leave as cash
6. Once cash is available, convert to the Roth IRA I currently hold in same investment firm
Trying to figure out the best strategy to convert to backdoor Roth with minimal tax obligations. Thanks for your posts – very informative! If you have other suggestions with this scenario, I’m all ears!
1a. No. Probably not.
2. Doesn’t need to be same company. Make sure you qualify to open an i401(k).
3. Ok
4. yes
5. If you want
6. Yes
There should be no tax cost for anything you’ve described. An easier alternative (especially if you don’t qualify to open an i401(k) because you have no self-employment income) may be to roll that rollover/traditional IRA into your employer’s 401K(k).
I’m a fellow that’s graduating this July my salary in fellowship has been 70,000. I’m starting a job making 350,000 September 1st. I’m guessing (based on rough calculations) that I will be above the 140000 which allows me to contribute to a Roth IRA. I accidentally contributed 1000 at the beginning of the year because I didn’t think about changing jobs and my increase in salary later in the year. Any advice on what I do with that 1000 dollars and should I do a backdoor Roth now or wait until next year to start?
Thanks!
Do this with your $1,000, then do the rest through the BAckdoor.
https://www.whitecoatinvestor.com/ira-recharacterizations/
I have an IRA, a 457(b) and a defined benefit pension plan through my employer. Can I still do a backdoor Roth?
Yes, but you’ll be prorated on it because you have money in a traditional IRA. You need to either convert that to a Roth IRA, move it into a 401(k) or 403(b), not do IRA contributions at all, or at least not do the conversion step of the Backdoor Roth IRA process or you’ll be pro-rated.
It’s okay. It’s not the end of the world to save $6K in taxable a year instead of $6K in a Roth IRA.
I have a profit sharing account through Vanguard. I am confused if I can just convert to Roth IRA directly through Vanguard (as it allows this) or if I need to convert to a 401K first due to the pro-rata concern that I am reading about here? I have another 401K account with my employer, through Fidelity, and that’s it.
If you’re allowed to withdraw from the profit sharing account then you can transfer it directly to a Roth IRA. If you aren’t, the profit sharing account must allow in service conversions. So ask HR if that’s an option.
No pro-rata issue here unless you put it in a traditional IRA and leave it there and then do a Backdoor Roth RIA each year for some reason. So don’t do that.
My wife put money into her traditional and left it in there for awhile before conversion so there was 6001.87 and she was able to convert the entire amount to a Roth – did this cause issues since it was >6k?
You’re going to love this post:
https://www.whitecoatinvestor.com/pennies-and-the-backdoor-roth-ira/
Bottom line it’ll be fine.