By Dr. Jim Dahle, WCI Founder
It is not much different to do a Backdoor Roth IRA at Fidelity than it is at Vanguard, Charles Schwab, or anywhere else. The first step, of course, is making sure you have both a traditional IRA and a Roth IRA at Fidelity. It should only take a few minutes to open those up. Start with the traditional IRA.
Step 1: Contribute to Fidelity Traditional IRA
First, log into Fidelity. Then, click on “Open an Account” at the top.
Select “Open an account” in the Retirement & IRAs section, and on the next page, select “Open an IRA” in the Traditional IRA section.
After inputting your personal information, look over the “important documents” and open the account. Easy peasy.
You should now see it on the left side of the screen with your other Fidelity accounts.
Next, you'll need to fund that traditional IRA. It's easiest to just transfer it from your checking account. Hit “continue” at the bottom of the page.
Now you have $7,000 [2025 individual contribution limit] in your traditional IRA. You'll probably need to leave it in the traditional IRA for at least a few business days (or what Fidelity calls “an extended hold period”) until you can see the $7,000 actually in the account. This is an old screenshot with a different amount of money in it, but you get the point.
Now, you just need to convert it to a Roth IRA.
Step 2: Convert Fidelity Traditional IRA to Roth IRA
If you don't yet have a Roth IRA at Fidelity, you can open one up from the exact same place you opened up the traditional IRA. This time, click “Open a Roth IRA.”
Log back in when the money appears in the Traditional IRA and hit “Transfer” at the top.
Just transfer $7,000 from your traditional IRA to your Roth IRA. If there are a few extra cents that you made from interest in the account, don't worry about it.
Do not have taxes withheld because there will not be any due.
Convert the entire balance. Be sure to leave the account open for next year.
Step 3: Choose Your Fidelity Roth IRA Investments
You can now invest it into your preferred investment within the Roth IRA in the usual manner.
If you have a question about the Backdoor Roth IRA and not Fidelity 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 has been answered there.
What do you think? Do you do your Backdoor Roth IRA at Fidelity? Why or why not?
Thanks for your tips. Sent money to Traditional IRA last week of Dec, 21 so it did not let me convert to ROTH IRA this week due to holiday delays. Planning to do that now. It did accumulate $.01 but will just leave it in account. Do Fidelity or other brokerage track which year we are trying to convert or is that just paperwork on our part? Planning to initiate the 2022 transfer immediately after this is done.
Did have a question, what if we do more than 2 conversions this year. Not that I am attempting to do this but, how does IRS come to know?
Conversions don’t have an annual limit so they’re not “assigned” to any year other than the calendar year they’re done in. Put your 2022 in now and convert the whole $12K together at once. All conversions you do in a year are lumped together on your 8606.
So I will be doing one 8606 for 2021 tax year for 6k and another for 2022 tax year for the next 6k?
Yup.
A follow up question. My wife had a tax deductible IRA (at Vanguard) which we emptied on Dec 31 to rollover to her 401k (at Fidelity) which happened this week. Does this meet the pro rata rule for 2021? Can she contribute to an traditional IRA and do backdoor for 2021? Do I close out the $0 balance Vanguard account first or does it not matter?
Was the money in a traditional IRA on Dec 31, 2021 at close of business? If so, then you’ll be pro-rated.
Yes, a 2021 BD Roth can be done until tax day.
You’ll need to empty out the traditional IRA by Dec 31st of the year you do a conversion to avoid proration.
Yes, as of Dec 31, 2021, the balance was 0. So I guesswe are good to start a BD for 2021.
Sweet.
Thank you for the detailed guide. I was wondering if the build back better bill would affect this?
Sure, if it had passed this wouldn’t be legal.
Hi,
I made a $6,000 Roth IRA contribution for 2021 but found out that I will end up making too much in income so I will be above the limit.
I haven’t filed any taxes yet for the 2021 tax return, so I want to do a backdoor roth instead of excess contribution withdrawal (found out about a backdoor roth option recently).
I have a Rollover IRA account with money in it. Does this disqualify me from doing a backdoor roth?
If not, then once I recharacterize my 2021 contribution and do the conversion (in 2022), does the conversion (that happened in 2022 prior to filing 2021 taxes) qualify for the 2021 tax year? Or would it act as if I contributed for 2022?
I hope that made sense, and thank you in advance!
“Disqualify?” No. But it does mean you’ll need to do something about that rollover IRA if you want to do Backdoor Roth IRAs.
No. The conversion will occur during the 2022 tax year and be reported on your 2022 taxes, even though the contribution will be for the 2021 tax year and be reported on your 2021 taxes.
No, it wouldn’t act as if it was a 2022 contribution. It will act as the 2021 contribution it is.
So the process for you would be:
1) Recharacterize the 2021 contribution from Roth IRA to traditional IRA.
2) Do something with the rollover IRA (transfer it into a 401(k) or a solo 401(k0 or a 403(b) or if it is small convert the whole thing to a Roth IRA and pay the taxes on it.)
3) Make a 2022 contribution to your traditional IRA
4) Convert the entire traditional IRA to a Roth IRA. Voila! You’re done with your 2021 and 2022 Backdoor Roth IRAs.
https://www.whitecoatinvestor.com/ira-recharacterizations/
During my attempt for a backdoor roth for this year, some things look different on Fidelity. The biggest one is the Tax withholding information.
I do not have two options. Just one “I understand that I’ll likely have to pay taxes later.”
That’s fine, click that.
First year doing a backdoor roth IRA conversion because of metting income limits for my roth. I spoke to Fidelity representative and they keep saying to talk to a tax advisor….
In 2022 I opened a traditional IRA and contributed $6,000 from my bank account to the IRA. I then want to convert the $6,000 to the Roth IRA. Fidelity representative kept saying I need to pay tax on the $6,000 but why would I need to pay tax if it is coming from my Bank Account? I just want to convert the $6,000 and then my traditional IRA will be back to $0.
So is it as simple as doing the conversion, fill out the form 8606 when doing my taxes in 2023 and I walk away without owing any additional tax? That is what it seems like to me. The fidelity representative also spoke about situations where I can be double taxed that confused me as well…
Yes, it’s that simple. You definitely should not take tax advice from a Fidelity phone rep.
If you don’t fill out 8606 right you’ll owe tax on the conversion inappropriately. That would be double taxation.
Question about the pro-rata rule for previous year: In 2021 I had money in a traditional IRA rollover account (and I currently still have this money in the same account). Now, in 2022, I want to do a 2021 BD roth.
From what I understand, I need to somehow empty out the rollover account, open up a tIRA, contribute $6,000 for 2021, and then do the Roth conversion. I will then need to fill out form 8606 for 2021 because I did a non-deductible contribution to a tIRA. But the actual conversion won’t be reported until the 2022 8606. And since the conversion took place in 2022, I have until Dec 31, 2022 to empty the rollover account if I want to avoid the pro-rata? Or am I already too late with regards to the pro-rata rule?
Sounds like you understand perfectly to me.
Thank you for the detailed article! I have a question. I am putting $6,000 into a Traditional IRA. Then, I am moving that $6,000 to a Roth IRA and NOT having federal taxes withheld.
I have a small pre-existing sum in my Traditional IRA. In order to avoid the pro-rata problem, do I move the entire sum in the Traditional IRA all in one move and NOT have federal taxes withheld on the whole sum?? Or should this be two separate moves – one in which I do NOT pay federal taxes on the new $6,000 and then I move the remaining sum from the Traditional IRA to the Roth IRA in a separate move that I DO pay taxes on??
Thanks!
That’s what I would do. You’ll owe taxes on the pre-tax money, but you don’t have to have money withheld from the IRA to pay them.
Thank you for this great blog.
So helpful.
I am trying to convert money from tradional IRA to roth. 1 mistake I did was that I could have directly opened a roth I think last year since I moved from fellowship to attending last year and my salary last year total was less than 140k. I don’t think there is anything I can do about that!!
1. Another mistake of opening tradional last year in Dec 2021, and not converting the money to Roth. I also didnt invest so by end of the year I had 6000.02
–Now, I plan to convert. Issue is that I invested that money and have loss. In any case, my question is when I convert the money : it asks me for federal and state tax both which I didnt see in your tutorial [ state tax].
I am state of MA, I assume it should be DO not withold tax for both federal and state?
This money is non deductible since I have a 403b from work.
My main question is do I say the same thing for stare tax??
Thanks
No, don’t withhold for federal or state.
I did the backdoor Roth IRA conversation in 2021 and am looking to file my taxes myself. Do you have a specific link or article to provide guidance on steps for filing taxes properly?
Appreciate all the great information you provide.
https://www.whitecoatinvestor.com/backdoor-roth-ira-tutorial/
I did back door Roth IRA conversation in 2021 and plan to do the same in 2022. We have an interesting situation. My wife is planning to move to a new employer in few weeks and has been given few options for her 401k and I would like to see what would be the best option so we can continue using the backdoor Roth IRA.
Her options 1)keep 401k with current employer and continue investing options offered by current employer- simple choice but investment options are very limited 2) roll over to new employer’s retirement plan – second best choice, but again will be limited investment options 3) roll over to IRA- My preferred route, but need your input.
Since we can’t have money in tradition IRA account for doing the backdoor Roth IRA, should we not prefer it? I would like to see if there is any way I can still put the money from 401 into traditional IRA and be able to move it to Roth IRA without taxes- I suspect this is not feasible? What would be best option out of 3 options above? Any way I can leverage option 3 without too much taxes and penalties?
Thank you for the great article.
I have contributed to traditional IRA for 2020, 2021 and 2022, but never converted to Roth IRA as my income is about the Roth limits. I am about to my file taxes in the coming week. What should be my strategy for backdoor Roth IRA conversion ? Should I convert all the amount from traditional to backdoor ROTH IRA ? And what amount should I put in form 8606 ?
Thank you very much
About or above?
The amount you convert goes on your 2022 8606 plus the amount you contributed for 2022. The other contribution amounts go on your 2020 and 2021 8606s. See more info here:
https://www.whitecoatinvestor.com/backdoor-roth-ira-tutorial/
Thanks for the reply, Based on the tutorial, I believe, I am must complete part 1 for form8606 for 2020, parts 1 and 2 for 2021 form 8606 and separate form 8606 for
2022. Should I transfer all the amount from my traditional IRA to Roth IRA now ?
Thank you
Sounds right. Yes, if you don’t want to get pro-rated, you need to empty out that traditional IRA and the easiest way to do it is to just convert it all to a Roth IRA.
In the past I had done the backdoor Roth… opened a traditional IRA with a $0 balance, and transferred to Roth immediately. Then I moved an old employer 401k (about $15k) to my traditional IRA account, just to get all my accounts at the same place. The next time I did the backdoor I had to pay taxes on the money in my traditional IRA. Now for the past several years I have only contributed to the traditional without converting it to the Roth (stupid, I know). I want to get back to it, but I’m guessing I’m going to have to pay taxes on everything in my traditional now (40k). Correct? What is my best option… is it still worth it? I currently have 3 Fidelity accounts… the traditional, the roth, and 1 old employer 401k.
I’d still do it. The amount of tax you pay depends on how much of that money has already been taxed. But with the market down this year, seems like a great time to do a conversion to me.
Complicated situation that hopefully has a simple answer. My wife and I will be attendings in July of this year and so I followed your backdoor Roth conversion for 2022 since our income will be too high to contribute traditionally. I also had a SEP-IRA that had to be converted to my Roth before the backdoor conversion. These conversions were done in January of this year.
We both had made individual Roth contributions in March of 2021 for the 2021 tax year. However, we sold quite a bit of stock in December 2021 which ended up pushing us over the cutoff for traditional Roth contribution. Because of this, I had Fidelity recharacterize our 2021 Roth contributions, both of which made about $400-500 dollars (so ~$6400 recharacterized for each of us) and then I did a Roth conversion on each recharacterization. This was done just a few days ago.
I’m a little confused on what to do here for our 2021 tax return. Will I pay any taxes on that gain of ~$400 for the 2021 tax year, or will that be paid on the 2022 tax return? Is there a 1099-R that I receive for 2021 return, or do I only get that next year for the 2022 return?
Lastly, do I need to make advanced tax payments on the SEP-IRA to Roth conversion, or can that be paid when I file in 2022? It’ll be around $5000 I think. Thanks!
2022.
I don’t think so. But you should get one next year.
Depends. Probably not on $5K. If you’re worried, you could adjust your W-4.
I am a current intern and my soon-to-be wife will be completing her residency this summer. With her upcoming attending position our combined income this year will be very close to the Roth IRA contribution limit for married filing jointly.
1. Is it worth it to wait until tax season to figure out our MAGI/attempt to decrease our MAGI if needed with traditional 401k contributions in order to get under the limit and do normal Roth IRA contributions? Or should we just both do backdoor Roths now to not worry about it and get the money invested sooner?
2. For the sake of consolidation I intend to roll over my current 401k (all Roth dollars, none traditional) into my Roth IRA this summer when leaving my transitional year program. Is there any issue with doing that roll over in the same year as a backdoor Roth? I assume no pro-rata rule as it is all Roth?
1. No. Just do Backdoor Roth IRAs.
2. No. It’s fine.
Hi Dr Dahle,
thanks for all this wonderful knowledge and all that you do!
I had a question about the Roth conversion step. If I do a late contribution to a traditional IRA for 2021, is there a penalty to the Roth conversion step if performed after tax day (April 2022)? Or do I have until December 2022 to convert?
Thanks
Sam
There is no time limit on conversions. The IRS treats a conversion done in January the same as one done in December.
I contributed $6k for 2021 to my traditiona IRA (which I had just opened) on tax day, April 18, 2022. I had already filed my return last week on April 12th, 2022. I was not able to convert traditional IRA to Roth IRA because the money had not settled yet so I had to do it the day after, April 19th, 2022. Do I owe any additional forms to the IRS for 2021 taxes? Do I owe any additional money?
No. You’re fine. Although you probably need to file a 1040X including an 8606 showing your 2021 contribution. Only the contribution had to be made by tax day, not the conversion.
Great article and website! Need your guidance. I put in $12,000 (after tax) into a Fidelity traditional IRA in January of this year with aim of doing both the 2021 and 2022 back-door Roth conversion. Unfortunately, I have fallen into the “mistakes” category with the conversion. I didn’t notice I missed the conversion and that the money was still in my traditional IRA until recently. I have now missed the 2021 conversion deadline. I did complete the 2022 conversion recently. However, I am now sitting with $6,000 (after tax money) in the traditional IRA (not invested, sitting in account as cash). It has gained $20 in interest as well. I am now concerned about the implications of having this $6,000 in a traditional IRA – Am I allowed to have a traditional IRA? what should I do with it? can I leave it there and use it for Backdoor Roth conversion for year 2023? Should I leave it there and invest it? Should I withdraw it? Any guidance is appreciated.
There is no conversion deadline. Just do it now and you’re good. No mistake yet.
Awesome. I now understand – no deadline on the actual conversion, as long as funds have been transferred to IRA prior to appropriate deadlines. Thanks for the quick reply. Your website has been invaluable!
I guess 12/31/2022 is a deadline of sorts. You get pro-rated after that. But it’s not technically a deadline since you can still do the conversion after that.
Hello Dr. Dhale,
Thanks for all the useful information and guidance.
I have two 403b accounts with the same health care organization but two different hospitals. The first one was opened as soon I started to work in that hospital in 2016. The second was recently opened last year when I started that second job. Now I am working for the first hospital as an independent contractor and that 403b is not getting any funds. Fidelity told me I cannot do anything for that account since it is inactive but because I appeared as an active employee I cannot do consolidations or rolled overs or even fund that account. I have reached out my HR for this matter. My questions:
1. Having this two account, can I still open a back door Roth IRA?
2. I was told at Fidelity by one financial consultant that because of my high income I am not allowed to have a Roth IRA, even when I already had opened the traditional IRA and funded with $6,000. This financial consultant was supposed to help me set up the conversion for the back-door Roth IRA, instead, he completely discouraged me, made me feel afraid and tried to convince me to pay for management of that account. I just want to clarify it is possible and I am allowed, contrary to what that person mislead me to do and think.
1. Yes
2. Yes, possible, allowed, and appropriate. Obviously don’t use that person as an advisor.
I’m not 100% convinced that you were really allowed to use both those 403(b)s. But that’s kind of water under the bridge now.
Thank you for the wonderful tutorial.
My question is: Suppose I file my 2022 tax in February 2023. In March 2023, I open my Traditional IRA account and contribute to this account for the year 2022 and 2023. So the Amount could be $12000 ($6000 for 2022 and $6000 for 2023). One day later I convert all the balance to the Roth IRA. In this case, when I file tax for 2023, I will need to report the backdoor Roth conversion for both years (2022 and 2023) in the same one form (8606)?
The reason that I am delaying the backdoor thing is that I did some Roth conversion from a pre-tax rollover IRA to Roth IRA in 2022. I am working on moving the remaining balance in the Rollover IRA to my work 401K plan to avoid prorata when I have a traditional after-tax IRA open. Thus by the end of 2022, I won’t have any pre-tax IRA in Fidelity and elsewhere. To avoid complication, I think I should open and do the backdoor thing in 2023.
What do you think?
Why would you file your taxes before you’re done doing your 2022 financial transactions? I wouldn’t do that if I were you.
It’s fine to do your 2022 Backdoor Roth IRA contribution in early 2023 if you want to do that. Just make sure the paperwork is right when you do report it.
Thanks for this great site. So, in 2022, I surrendered an annuity (over $100k) and it is now in a Fidelity Traditional IRA as cash.
If I convert this all into my existing Roth IRA for 2022, will this pre-tax money be treated as income? I then owe tax on that income? If so, is the tax strategy to do a little bit of the traditional IRA conversion each year to keep me in a lower income tax bracket?
Thanks
Yes.
Yes.
Yes.
Thank you for the tutorials!
I have a Fidelity Go Traditional IRA that I have just put in the $6k for this year. Can I open a Fidelity Go Roth IRA account and then do the transfer, or do they have to be regular IRA accounts?
Thank you!
I don’t know what “Go” IRAs are. Let me look that up…..
Looks like these Go IRAs use a roboadvisor at Fidelity. Do you really want/need that? You know you can do this without the roboadvisor, right?
Looks like it is free until you have $25K, then 0.35% per year.
I’m sure you can do a Backdoor Roth IRA either way, but it might be more hassle (or perhaps easier) to do it with this roboadvisor thing. The Betterment roboadvisor made it easier. There was “Backdoor Roth IRA” button and all you had to do was hit it!
I followed this guide and the general backdoor Roth conversion tutorial. I used Fidelity and put 6k in a traditional IRA. The money was available in the account in just a couple days, but for some reason , I had to wait an additional week or so until I could convert it into a Roth IRA. Anyway, after it worked, I had 6k invested in the Roth IRA account, and left $0 in the traditional IRA open for use next year!
I checked the accounts today, and for some reason, the traditional IRA now has just over $3 in it!
I checked the transactions and it says “DIVIDEND RECEIVED FIDELITY GOVERNMENT MONEY MARKET (SPAXX)”
Where are these dividends coming from and why are they being put in the traditional IRA?
I am asking this question as in the guides, it says you MUST have $0 in the traditional IRA on Dec 31st. How do I get rid of the $3 to get the traditional back down to $0? I am confused.
You earned it in that week while the money sat in SPAXX, no big deal. More info here:
https://www.whitecoatinvestor.com/pennies-and-the-backdoor-roth-ira/
Basically, put that $3 into the Roth IRA or you’ll have a tiny pro-ration on your form 8606 for this tax year.
Had the same thing happen to me with Fidelity even though I did the conversion from Traditional IRA to Roth IRA the very NEXT day.
I put $6000 in my Traditional IRA on 11/28/22 and converted (transferred) the ENTIRE 100% ($6000) to Roth IRA on 11/29/22. On 11/30/22 there is $0.55 in the Traditional IRA as “DIVIDEND RECEIVED FIDELITY GOVERNMENT MONEY MARKET (SPAXX) (Cash)”.
Just so that I understand correctly, I do the same conversion for the 0.55 cents as I did for the $6000? That is convert (transfer) $0.55 from Traditional IRA to Roth IRA this year itself before 12/31/22?
What about Form 8606? How or where do I account for the 0.55 cents?
Yes. It shows up on line 8 as $6001.
How can we transfer more than the $6.5k limit to the Roth? I did my $6k rollover last year and now have $6,506.89 in the Traditional IRA. Do I need to wait until next year to make it perfectly $7k or should I transfer the $6.89 back to my brokerage account at this point?
How? When it asks how much you want to transfer/convert you put $6,506.89 in that box.
Sorry to be a smart alec, but how else would you do it?
I think people get confused and think there is a $6,500 limit on BOTH contributions AND conversions. There isn’t. The limit ONLY applies to contributions. So you contributed $6,500. It happened to grow to $6,700 before you converted it. That’s okay. You’ll owe taxes on $200, but you haven’t done anything wrong. In your case, you’ll owe taxes on $6.89 after converting $6,506.89. More info here:
https://www.whitecoatinvestor.com/pennies-and-the-backdoor-roth-ira/
Hi Dr. Dahle,
Please forgive my stupid question in advance and keep in mind that I immigrated to this country toward the end of my medical school; So all the finance and tax stuff are relatively new concepts to me compared to someone who was born here. However I’m currently reading your book, listening to your podcast and also reading different articles on the website. Thank you for all what you do to help dummies like me learn finance and investment.
I’m a gastroenterology fellow graduating in June of this year. I’m married and my wife is currently a student doing a Ph.D. her annual income is around 15 K and mine is around 50K and we file jointly. However this will change by September when I start working as attending.
So I never had Roth IRA and I assume for 2022; I qualify for Roth IRA and I don’t really need to do the backdoor one but I didn’t open one yet and I haven’t filed my 2022 tax return yet. If I open one through fidelity which I already have an account in since University uses them for 401K during my fellowship and I contribute 6K soon. When I’m filing my 2022 tax return, do I involve it in my return or do I file it in 2023 tax return since I technically opened it in 2023?
And if I have to file it in my 2023; would that limit me from doing backdoor Roth IRA for 2023 assuming that my income won’t qualify me for direct contributions?
Since me and my wife file jointly, can I contribute 12K to one Roth IRA or does she have to have one under her name?
Lastly, once I’m an attending but my wife continues to have low income since she still has 3 years left in her PhD, for the coming years, can she contribute directly to Roth IRA or does she have to do a backdoor one since the sum of our incomes wouldn’t qualify her for direct contribution?
Sorry lots of questions but I promise you I’m learning.
Regards,
MB
For 2022, no problem contributing directly to a Roth IRA. It’s possible that for 2023 you will make too much (it’s almost $200K, but a GI doc could do that in 6 months) and will have to contribute indirectly. Best to do that as there is little downside to doing it via the Backdoor Roth IRA process.
The contribution for 2022 will be reported on your 2022 tax return. The conversion will be reported on your 2023 tax return. But neither will affect your ability to do the same thing for 2023.
You each need one. $6,000 a piece for 2022, $6.500 a piece for 2023.
You’ll probably file jointly, so she’ll need to do hers through the Backdoor process/indirectly for 2023 on too.
I am undergoing my Fidelity backdoor Roth and followed all steps above, currently on step 2 and after hitting transfer on the next window under “which account do you want to transfer from”, im picking Traditional IRA. It lists then my account balance: total account value $6500, and the cash available to draw value $0.
I’m wondering am I not being patient enough and need to wait another day or misunderstanding a step.
Sounds like you need another day or two.