Menu

Convert Traditional IRA to Roth?

Home Retirement Accounts Convert Traditional IRA to Roth?

  • Avatar bjm_uga 
    Participant
    Status: Resident, Physician
    Posts: 2
    Joined: 08/12/2019

    I am currently a fellow in a high earning specialty. I married a low income earner during residency. Together, we have about 25,000 in TIRA assets (she 20, me 5). Clearly, Roth’s are the best option and I have been contributing to one since before we met. Once I am out of fellowship in a year and can no longer do direct Roth from an income perspective, it will be time for us to do backdoor Roth. To do such, will have to convert our outstanding TIRAs to Roths and take that tax hit. In the long run, this is still the smart move, right? Would then plan on doing maxed out backdoor Roths for myself and spouse every year. Is there any benefit to leaving her traditional IRA alone and just do backdoors for myself?

    Thanks.

    #238305 Reply
    Liked by Craigy
    Avatar jacoavlu 
    Moderator
    Status: Physician, Small Business Owner
    Posts: 2282
    Joined: 03/01/2018

    you need to have a guess at your marginal federal plus state tax rate for 2019, to figure out the tax cost of a Roth conversion in 2019. It may very well be the smart thing to do.

    But converting isn’t the only option, you and spouse may have workplace retirement plans in future where tIRA could be rolled into thus clearing the door for backdoor Roth.

    The Finance Buff's solo 401k contribution spreadsheet: https://goo.gl/6cZKVA

    #238313 Reply
    Liked by Craigy, Lordosis, Peds
    Avatar bjm_uga 
    Participant
    Status: Resident, Physician
    Posts: 2
    Joined: 08/12/2019

    Thanks Jaco, good point on the other option.

    #238684 Reply
    Craigy Craigy 
    Participant
    Status: Spouse
    Posts: 2023
    Joined: 09/16/2016

    I would shy away from waiting too long before you find yourself in a higher bracket.  Even that 1st year where you only have a half year of attending income, you will likely be paying substantially more to convert.

    It seems like few workplace plans accept outside cash.  I don’t have stats to back that up, but it seems like it is rare in my anecdotal experience.

    If you plan on being married a long time 😉 , I’d want to do roths for both spouses and not just one.  It will (obviously) double your backdoor roth space.

    I converted probably $10k of IRA to Roth.  Luckily we over-withheld that year and the tax return pain was minimized, but I was kicking myself that I did it in a higher bracket than I should have.

    LEVEL 1 WCI FORUM MEMBER.

    #238688 Reply
    The White Coat Investor The White Coat Investor 
    Keymaster
    Status: Physician
    Posts: 4482
    Joined: 05/13/2011

    https://www.whitecoatinvestor.com/roth-conversions/

    Rolling your TIRA into your employer 401(k), if available, is also a good option.

    Site/Forum Owner, Emergency Physician, Blogger, and author of The White Coat Investor: A Doctor's Guide to Personal Finance and Investing
    Helping Those Who Wear The White Coat Get A "Fair Shake" on Wall Street since 2011

    #239366 Reply
    Faithful Steward Faithful Steward 
    Participant
    Status: Financial Advisor, Small Business Owner
    Posts: 493
    Joined: 06/12/2017
    To do such, will have to convert our outstanding TIRAs to Roths and take that tax hit. In the long run, this is still the smart move, right?

    Click to expand…

    If you’re going to pay conversion taxes at one of the top marginal brackets, a better option might be to roll your Traditional IRAs into your employer plans. That will also clear the deck for your Backdoor Roth strategy.

    Michael Peterson, CFP® | Faithful Steward Wealth Advisors
    https://ProsperousPhysician.com | (717) 496-0900

    #240683 Reply
    Avatar Peds 
    Participant
    Status: Physician
    Posts: 4240
    Joined: 01/08/2016

    I am currently a fellow in a high earning specialty. I married a low income earner during residency. Together, we have about 25,000 in TIRA assets (she 20, me 5). Clearly, Roth’s are the best option and I have been contributing to one since before we met. Once I am out of fellowship in a year and can no longer do direct Roth from an income perspective, it will be time for us to do backdoor Roth. To do such, will have to convert our outstanding TIRAs to Roths and take that tax hit. In the long run, this is still the smart move, right? Would then plan on doing maxed out backdoor Roths for myself and spouse every year. Is there any benefit to leaving her traditional IRA alone and just do backdoors for myself?

    Thanks.

    Click to expand…

    convert it this year. you were a resident for half, and a fellow for half.

    next year youll be an attending for half, so not as ideal.

    no, you need to do rIRA for both of you, every year.

    #240686 Reply

Reply To: Convert Traditional IRA to Roth?

In case of a glitch or error, please save your text elsewhere, clear browser cache, close browser, open browser and refresh the page.

Notifications Mark all as read  |  Clear