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Automatic IRA/Backdoor Roth Investing

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  • Automatic IRA/Backdoor Roth Investing

    I'm a married FP with 5 soon to be college aged kids.  My employer has had a very nice retirement package and I've been saving ~18% of my salary for retirement in 403(b)/457.  Add another ~15% into five 529 accounts.  I feel like we're doing pretty good, all things considered.

    My wife has worked part time as a pedi occupational therapist, so she has never had a retirement account, but I think we are at a point to get around $5k year into a new IRA and convert it annually to a Roth IRA (backdoor Roth).

    My plan is pretty simple.  Transfer $100/week from our checking account and convert at the end of the year.

    2 Questions:


    1)  I'm probably going with Etrade, since I have very a small taxable account there already and our savings account there.  Thought about Fidelity or Ally, but simplicity of one system might beat the variety a different brokerage can give me.  Reasonable?

    2)  Is my only option really to let the $100/wk pile up and then move it as a lump sum at the end of the year?  Can I auto transfer each week from traditional into the Roth?  Is there anyway to invest that money each week buying a commission free ETF like SPDR?  This is smallish % of our savings, so buying a single index fund is fine, I think.  Just don't want to have to log in weekly/monthly to buy more shares.  Etrade chat says its not doable.  Does that sound right?



  • #2
    Figure out how to do $12k/yr into Roths, $6k for each of you.

    If you're funding the 529s beyond the state tax break while neglecting your own retirement, that's probably not ideal.


    • #3
      Your $100/month purchase of an ETF is problematic due to the fractional share issue. But, you could probably do a $100/month automated mutual fund purchase. I know this would be very easy to setup at Fidelity, not sure about E*Trade.


      • #4
        What, no.
        You buy 6k at once, convert once cleared.
        Don't you have an efund?


        • #5
          $100 a week?  Why not just fund the account all at once and be done with it.  If you cannot come up with an anticipated 6K or even 12K for that matter on a physician salary there might be a problem.

          Sounds like you are pouring a lot into college expenses.  Be careful that you are not neglecting your retirement.  I think it is a good idea that you are looking into the back door roth as a way to save.  More detail would be helpful.


          • #6
            agree with others-you're making this more complicated than it needs to be. Do you have an emergency fund? I know it's emergencies only but I'd take $12k from there today and fund a Roth IRA for you and a Roth IRA for your spouse. Then I'd rebuild your emergency fund. I'd also start saving up another $12k to do this Roth IRA thing on January 2, 2020. Then get your efund back to your desired level. I'd too dial back 529 contributions, maxing out only whatever the state tax deduction is. your retirement is more important than college, and it sounds like you might have a decent chunk in 529s already but we need more info


            • #7
              I live in Texas, so no state income tax to avoid.  I've used the Iowa's 529 through American Funds.  I'll have all 5 kids in undergrad at the same time for multiple years.  I knew if I didn't sock away a lot, just "tightening the belt" during those years wouldn't work.


              • #8
                I"m at 18-20% of my salary for retirement now and have been since I got out of fellowship.  I'll probably boost that up to 21-23% over the next couple of years.  Once undergrad is done for the kids (6 years from now), I plan on that $2500/month going into retirement.


                I'm 48 years old now as a point of reference.


                • #9
                  So, you've been investing in high fee American funds 529s while not getting a state tax break. Bummer.

                  Your kids can take out loans for college. You won't be able to take out loans for retirement.