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Resident to Attending, What do I do with Roth IRA from Residency

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  • Avatar Cameronmedicine 
    Participant
    Status: Physician
    Posts: 1
    Joined: 08/02/2019

    Hello, I graduated Residency June 2019, started my Attending position August 2019.  I have a Roth IRA which I started during Residency with approx $16,300 in value.   My question is what do I now do with this account (through fidelity).  I have been hearing of the backdoor roth, but specifically what would I do with my prior Roth IRA account.  Any help is appreciated.

    #243256 Reply
    Avatar wa2106 
    Participant
    Status: Physician
    Posts: 185
    Joined: 11/29/2017

    Keep it and congratulate yourself on funding it during residency.

    Backdoor Roth is for future contributions (once you are above income limit for direct Roth contributions).  The mechanics of that have been described multiple places on this website but basics are you open a Traditional IRA, fund it with $6000, then convert it to Roth.

    Good luck!

    #243268 Reply
    Liked by Hank
    Avatar Peds 
    Moderator
    Status: Physician
    Posts: 4447
    Joined: 01/08/2016

    nothing.

    #243269 Reply
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 8137
    Joined: 01/09/2016

    Good work! As long as you are not planning to take distributions from your Roth in the next 5 years, just use it for step 2 of your upcoming backdoor Roth’s (the conversion).

    Welcome to the forum!

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #243277 Reply
    Liked by spiritrider
    Avatar hrain1099 
    Participant
    Status: Resident
    Posts: 15
    Joined: 03/06/2016

    Your Roth IRA is an INDIVIDUAL retirement account and therefore is attached to YOU, not your residency. So you just keep it around, make sure it’s allocated according to your plan, and start to utilize a Backdoor Roth by contributing non-deductible funds to a Traditional IRA and then converting it into your already-made Roth IRA. Read through wci’s instructions on how to do this.

    Good luck!

    #243542 Reply
    Faithful Steward Faithful Steward 
    Participant
    Status: Financial Advisor, Small Business Owner
    Posts: 517
    Joined: 06/12/2017

    Backdoor Roth is a strategy, not a type of account. Don’t feel bad, a lot of folks get lost on this issue.

    Simply keep your current Roth IRA. Now that your income is higher, as an attending, it’s unlikely that you qualify to make contributions directly to your Roth IRA. So, you need to open a Traditional IRA and make contributions for which you do not take a deduction – again because of your higher income. Once your non-deductible contribution hits your Traditional IRA, you simply request that your custodian do a Roth Conversion to move the money from your Traditional IRA to your Roth IRA. The only taxes you would owe, assuming you don’t have any other pre-tax IRA monies in any other accounts, would be couple of pennies of interest you earned for the few days the money sat in your Traditional IRA.

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

    #243586 Reply
    Liked by CordMcNally
    Avatar artemis 
    Participant
    Status: Physician
    Posts: 593
    Joined: 12/02/2016

    Hello, I graduated Residency June 2019, started my Attending position August 2019.  I have a Roth IRA which I started during Residency with approx $16,300 in value.   My question is what do I now do with this account (through fidelity).  I have been hearing of the backdoor roth, but specifically what would I do with my prior Roth IRA account.

    Click to expand…

    You keep it!  And you open a traditional IRA account at Fidelity, in order to make backdoor contributions to the Roth IRA you began in residency.  A backdoor Roth simply refers to the trick of making a nondeductible contribution to a traditional IRA, then performing a Roth conversion to move the money into your Roth IRA.  Since there’s no income cap on Roth conversions, this is legal, and because your traditional IRA contribution was made with after-tax income, you don’t owe any taxes on the conversion.

    #243680 Reply
    Avatar JDOG 
    Participant
    Status: Resident
    Posts: 5
    Joined: 08/18/2019

    Piggy backing on this OP q, don’t we want both Traditional and BD Roth accounts in high earning years so to maximize tax diversification upon retirement?

    #244039 Reply
    Avatar Peds 
    Moderator
    Status: Physician
    Posts: 4447
    Joined: 01/08/2016

    That’s what your 401k is for

    #244046 Reply
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 8137
    Joined: 01/09/2016
    Earnest refinancing bonus

    Piggy backing on this OP q, don’t we want both Traditional and BD Roth accounts in high earning years so to maximize tax diversification upon retirement?

    Click to expand…

    Yes. Typically max out your pre-tax 401K and also your backdoor Roth. Roth conversions if you have a low-income year in the meantime (sabbatical?) and after retirement, as practical and as your plan shows the conversions will lower lifetime taxes + meet your estate plan goals for passing along assets to the next generation.

    Iow, if you will outlive your assets (most doctors will, at least those who follow this forum), you should also consider tax diversification into the next generation.

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #244068 Reply
    Avatar SLC OB 
    Participant
    Status: Physician
    Posts: 565
    Joined: 06/23/2018
    if you will outlive your assets (most doctors will, at least those who follow this forum),

    Click to expand…

    You have so much faith in us, yay!

    #244090 Reply
    Liked by jfoxcpacfp
    jfoxcpacfp jfoxcpacfp 
    Moderator
    Status: Financial Advisor, Accountant, Small Business Owner
    Posts: 8137
    Joined: 01/09/2016

    if you will outlive your assets (most doctors will, at least those who follow this forum),

    Click to expand…

    You have so much faith in us, yay!

    Click to expand…

    Faith built on interacting with so many readers here. There is no way to calculate the impact the blog and forum have had on the finances of readers and participants.

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~
    http://www.fox-cpas.com/for-doctors-only ~ [email protected]

    #244175 Reply
    Liked by SLC OB

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