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?
Hi,
I contributed $6000 each to both 2021 AND 2022 Roth IRA in Jan 2022.
I just started working at the end of 2021 so my income for 2021 does not exceed the limit for 2021 Roth IRA.
However for 2022, I found out I exceed the limit for 2022 Roth IRA and shouldn’t have done Roth but instead do Backdoor Roth.
So I am trying to follow your guide (https://www.whitecoatinvestor.com/ira-recharacterizations/) for recharacterizing my 2022 Roth IRA and converting. When I checked my Fidelity account, it shows up as around $12300 in my Roth IRA account..
1. Since my income was low, I can leave my 2021 Roth account alone and don’t have to worry about recharacterizing and converting that $6000 – right?
2. When I call Fidelity to do recharacterization, I am ONLY recharacterizing $6000 from my previous contribution in 2022 Roth IRA? And also same for converting afterwards.. transfer only that $6000 from Traditional to Roth?
3. What should I do with that extra $300 in my Roth IRA?
Past Facts:
1.) Married couple each contributed $6,500 to traditional IRAs in January 2023 (for the 2023 year). This money has been losing/gaining with the market and is in investments.
2.) In April of 2023, married couple realizes that their income will exceed roth IRA limits (and therefore also greatly exceed tax-deductible trad. IRA limits, both have employer 401(k)s).
3.) Both traditional IRAs (one for each spouse) already had pre-tax funds/investments in them. Maybe $30k-$70k of pre-tax money each (from prior 401k rollovers etc.).
Hoping to get some advice:
4.) Married couple realizes backdoor roth is likely better than leaving the non-deductible, post-tax funds in the traditional IRAs.
5.) Each spouse plans to roll all-but $6,500 of their traditional IRAs into their employer 401(k)s (all pre-tax money).
6.) Then they will each convert their $6,500 post-tax money in the traditional IRAs into their Roth IRAs.
Are the above steps the best or most efficient way to salvage the current situation (of having non-deductible funds in the traditional IRA for the first time)?
Would it be better to convert the $6.5k to Roth now, then rollover the post-tax IRA amounts to 401(k)s before year end?
Is converting the money to Roth (each year) worth paying additional expenses/fees through the employer 401(k) for the funds that had to be rolled out of the IRAs (0.13%)?
Is there a way to calculate the gains or losses on the specific $6.5k (each) non-deductible/post-tax traditional IRA contributions, and then pay taxes on those at the end of the year? They have been in the market for 3-4 months.
Thank you!
Yes. Good plan.
No, do the rollover first or your conversion may be pro-rated. I mean, maybe it doesn’t matter but I’d still do the rollover first.
.13%? Probably. That’s not that much.
Yes, but I don’t think you have to as I understand how the calculation and paperwork on this will be done. You’ve got $6,500 basis in there due to the contribution and that’s what is going to be converted, no matter what happens with the investments in the meantime. When you go to do all this, let the money sit in cash from the time of the rollover until the time of the conversion.
Hi Dr. Dahle,
I contributed $6500 to the Traditional IRA but I didn’t invest it yet and somehow it accrued interest. My balance is $6528.
What do I do? Thanks!
Convert $6528 to a Roth IRA and pay taxes on the $28 next April when you fill out your 8606 form.
Thank you so much!
I’ve done this two years in a row and even though I move the whole balance out as soon as I’m allowed to I somehow end up with a very small amount of interest or something in IRA. Last year It was six cents they told me not to worry about it, but now I’m skeptical and this year it’s a dollar a something. What do I do about this? From what I understand you’re not supposed to have any balance in the IRA account long term?
If only there was a post written about those pennies…..
https://www.whitecoatinvestor.com/pennies-and-the-backdoor-roth-ira/
It’s no big deal either way, but the cleanest way is to do a second conversion with the remaining change.
Thank you for excellent post. Made the mistake you warn about and opened Roth IRA in March this year 2023, realized income doesn’t allow it recently. Already filed taxes. Fidelity recommended a recharacterization to backdoor IRA and they said ok to do as if the original contribution was for year 2022, convert to tIRA, then to Roth and then ok to add another 6k 2023 contribution through backdoor IRA. Is this true?
Appreciate your help in advance
If the contribution you made in March was for 2022, then yes, you can still make a 2023 contribution in addition to that. Recharacterize the original contribution, make the new contribution, convert it all to Roth, and probably amend your tax return for 2022.
Will this tactic work in conversion from Fidelity Rollover IRA to Fidelity Rollover Roth IRA?
Sure. A “rollover IRA” is just an IRA. You can contribute to it just fine.
Although in some states a rollover IRA may receive the same asset protection as a 401(k) (i.e. slightly more than IRA might get). Contributing to it could screw that up I guess.
Hello Dahle, Thanks for the very good explanation. First time contributing to backdoor in 2023. . I have Fidelity account with my employer 401K. My Wife doesn’t have any investment accounts. Can Open an a single IRA and convert to Roth the combined limit ( 13000) or open TWO separate IRA’s in my account and Convert both into Roths each 6500.
I’d just use the same one. Neither is illegal so why not choose the simpler option?
Question,
I work at a F500 and they have a Roth 401k with 6% matching. I am contributing the max federal amount for the Roth 401k (22.5k, now going to be 23k in 2024). I can contribute to an after or before tax as well but I haven’t (yet).
Where my problem lies is that I have about $10k that I want to invest in and was thinking of a backdoor Roth. So here are my questions:
– is the After Tax basically the backdoor Roth?
– I think you said that I have to have a traditional Roth at Fidelity to open a backdoor roth? Is this required? If not, can I contribute to that backdoor roth from Fidelity and then transfer it to my Roth 401k?
Thanks,
Tom
You’re confusing the Mega Backdoor Roth IRA process with the Backdoor Roth IRA process. The first involves a 401(k). The second involves IRAs.
https://www.whitecoatinvestor.com/the-mega-backdoor-roth-ira/
https://www.whitecoatinvestor.com/backdoor-roth-ira-tutorial/
With the mega Backdoor Roth IRA process, you first find out if your plan allows both required steps. The first step is to make after-tax (not tax-deferred and not Roth) contributions. The second step usually involves an in plan Roth conversion from the after-tax subaccount to the Roth subaccount.
With the Backdoor Roth IRA process, assuming nothing in a traditional, rollover, SEP, or SIMPLE IRA, you contribute to a traditional IRA even though you won’t get a deduction for doing so. Then you immediately transfer that money from the traditional IRA to the Roth IRA (Roth conversion). Since you didn’t get a deduction for the traditional IRA contribution, there is no tax cost to the Roth conversion.
Do you still have a question about moving money from IRAs to 401(k)s or does that help you understand both of these?
It does help somewhat but I found some clarity after having some confusion.
So while I have a employer sponsored Roth 401k that my employer contributes to, I will be maxing it out for 2024 ($23k). As for the Roth IRA, I decided to open a Fidelity account to open that type of account and contributed the max of $6500 and will contribute the new max at a later date ($7k). For the Roth, I just did a 80/20 FZROX/FZILX split in my orders.
My employer does offer a before tax, Roth 401k, and an after tax contribution from each paycheck. However, I think the current strategy I have is good for now. I have about $20k in savings/emergency in case and that will increase over time from each paycheck. My overhead is minimal and allows me to invest this much at age 37 but compared to my peers, I may be behind. The plan is to contribute to my retirement more aggressively.
What do you think? Is this a good strategy? The next step, once I have at least 6+ months of savings/emergency funds, is to then open a brokerage account to invest more in the taxed accounts.
If you have time, I am willing to pay you to help me with any advisement. Thanks! 🙂
Tom
I do similar to what you are doing plus personal brokerage account. Current Age 43 with goal to retire at 55.
This is stupid why not just open a Roth IRA to begin with? You are already funding the account with post-tax money.
What are you referring to? Above a certain income level, it is illegal to contribute directly to a Roth IRA. Not my fault, talk to Congress.
For 2023 I did the backdoor Roth thought Fidelity and ran into the “pennies” remaining in my traditional IRA and had $0.75 remaining in my traditional IRA at end of 2024 year. I had seen some of the pennies remaining earlier in 2023 and did another conversion to Roth for that small amount but I’m guessing another distribution from the moneymarket fund the cash was in was given into my account. My question is that remaining $0.75 in traditional IRA at end of care something that will cause any issues? My plan was to just include in my 2024 Back door Roth conversion.
You’ll be pro-rated, but iw won’t matter much. Yes, just move it over when you do your 2024 conversion.
Hi there!
Might be a dumb question, but just want to make sure I am ok before investing this year’s contribution. So this is the second year I am doing my backdoor conversion. For 2024, I did the same process as last year. Deposited 7k into my Traditional IRA, waited til settled, and then converted to my Roth IRA. This year though, the position of the 7k in the Traditional IRA was in “Cash”. I paid no attention to it though and still went through my conversion. Was that an ok thing to do? Appreciate the help!
Yes, that’s fine.
Hi there!
For 2023, I accidentally contributed 6500 into my Roth IRA instead of my Traditional IRA to do the backdoor since I earn above the income limit. I haven’t invested any of the money yet and it’s just sitting in my Roth IRA account. I was wondering if it’s possible to pull that money out, contribute it for 2023, do the backdoor, and still do another 7500 contribution for 2024? Would there be some complicated tax implication in pulling out the accidental 2023 contribution? Appreciate the help!
Do a “recharacterization”, then reconvert.
https://www.whitecoatinvestor.com/ira-recharacterizations/
Is there any reason not to select “transfer [money] from another fidelity account” rather than transferring from my checking account at another institution? (Most of my money isn’t in my checking account)
No.
Hi, slightly late to this conversation but I just have to clarify a couple things.
For 2024, my wife and I file jointly and will likely go over the income requirements to contribute to a Roth IRA. The write up in the email seems pretty straightforward. We already have a Fidelity account for 529 for kids Education. I would think we would go with Fidelity.
So simply by opening a Traditional IRA and transferring $7000 to it from our checking account. Waiting a couple of days till that clears, then open a Roth IRA and transferring the money from the Traditional to the Roth.
We continue to do this same process year after year and we have circumvented the income restrictions to be able to contribute to a Roth IRA?
Also, this money will grow and when we remove it at retirement we are not taxed on the money?
Am I missing something here? This does not sound overly complicated. How does this get around the income restrictions?
You aren’t missing anything. It’s just a loophole that allows higher income people to still get already-taxed money into a Roth IRA. Yes, you can do this every year and that money will never be taxed again.
You can do $7000 for you and also $7000 for your wife, in separate IRAs.
Thanks so much for your reply. The process I described above has started. Will move the money to the Roth once it settles in a day or two. Thanks again!!
Pretty wild eh? But yes, my wife and I have now done this every year for the last 15 years (2010-2024). You describe exactly how it works. Just be aware of the pro-rata rule discussed here:
https://www.whitecoatinvestor.com/backdoor-roth-ira-tutorial/
How do I handle the 8606 for the previous year (2023) if I have already file taxes BEFORE making the contribution that is allowed until April 15?
Do I send the 8606 in now for 2023 contribution even though 2023 taxes are already filed or wait until I file next year for 2024 taxes?
Go back and refile the 8606 with a 1099X. This year.
How do I handle the 8606 for the previous year (2023) if I have already file taxes BEFORE making the contribution that is allowed until April 15?
Do I send the 8606 in now for 2023 contribution even though 2023 taxes are already filed or wait until I file next year for 2024 taxes?
Hello Dahle,
Thanks for the great explanation. Married filing jointly and we are over the income requirements to contribute to a Roth IRA. I will be doing the backdoor Roth for the first time this year for both me and my wife. I understand the process through your explanation.
However, I want to confirm if my understanding of the individual nature of the accounts is correct?
1. I need to open two traditional IRA accounts – one for me and one for my wife?
2. For the Roth conversion – I need to open two Roth IRA accounts – one for me and one for my wife?
Am I missing anything?
1. yes.
2. Yes.
The I in IRA stands for Individual. There will be two 8606s on your married filing jointly return too.
Thank you very much for the confirmation.
Thank you Jim!
Long time follower and advocate for this site.
Question:
Prior 403b was transferred in to current employer 403b some years ago.
Can I xfer $6,500 from that 403b -> IRA and then follow the backdoor IRA steps discussed?
Tax implications as that money has not yet been taxed?
Advice on pros/cons of this approach instead of funding from checking account?
Goal is to use Roth money down the road for private high school expenses
TY
Thank you Jim!
Long time follower and advocate for this site.
Question:
Prior 403b was transferred in to current employer 403b some years ago.
Can I xfer $6,500 from that 403b -> IRA and then follow the backdoor IRA steps discussed?
Tax implications as that money has not yet been taxed?
Advice on pros/cons of this approach instead of funding from checking account?
Goal is to use Roth money down the road for private high school expenses
TY
Probably not. The question is why you’d want to even if the plan allowed you to do that. You’re missing the point of the Backdoor Roth IRA process. More info here:
https://www.whitecoatinvestor.com/backdoor-roth-ira-tutorial/
You’re describing a Roth conversion and yes that would all be taxable income if you were to do it.
Have you considered a 529 for the private school expenses?
Thank you Jim!
This certainty would be for a different reason than most backdoor Roth conversions.
In this case, I have a significant pension and don’t need to hold all the money in retirement accounts for typical retirement use.
Instead, I’d like to pull out money in 403b to use for private high school expenses, BUT NOT PAY 10% penalty. I’m fine being taxed on the Roth conversion as this is a vehicle to use 403b funds now and not take 10% penalty.
Colorado does not allow for 529 to be used pre-college.
Thoughts?
KP
That’s fine to do a Roth conversion, but it isn’t a “backdoor Roth IRA” just because you do a Roth conversion. That’s a term that applies to the process of contributing to a Roth IRA via a backdoor or indirect method.
I’m not sure your info about Colorado is up to date though. Check this out:
https://www.hanson-cpa.com/colorado-529-plan-update/#
Under the new law, parents also have the option to use 529 plan funds to pay tuition expenses for K-12 education at public, private, or religious schools. There is an annual limit though of $10,000 per beneficiary per year on withdrawals used for elementary and high school tuition.
If the $10K limit is an issue, you could transfer the money to another state’s 529 and then use it too.
Good luck!
Hi,
Thank you for sharing this detailed step by step, a few questions below (apologies if these are already answered)
– Since I already have a Roth IRA, can I create a single Traditional IRA and use the backdoor method every year (i.e., contribute the max, transfer to my existing Roth, and repeat annually)? Someone told me I need to create a new Traditional IRA each year and then convert it to a Roth IRA, which sounds like I’d end up with over 20+ Roth IRAs over time. Is this accurate?
– Is it recommended to recharacterize my contributions instead of completing a return of excess contribution form? (I do not have a Traditional IRA set up yet and since I just got married this year I need to fix this before the following tax filing next year)
Thanks!
Yes you can. That someone was wrong.
Yes, if you forget to do a Backdoor Roth, the fix is to recharacterize it then convert it back.
https://www.whitecoatinvestor.com/ira-recharacterizations/
Hello,
Thanks so much for all your hard work on this site. It seems you have an article for nearly every question and I really appreciate it.
I’m close to 30 and just stumbled upon this. Through all my research I’m realizing I need to rebalance my investments to index funds (majority are individual stocks) and put as much as I can into tax-advantaged accounts (IRAs). I have a 401k and emergency fund already. Just a few questions if you don’t mind:
1 – Do you have a preference between Fidelity and Vanguard? I’d like to open my first IRA and re-balance to the boglehead fund approach, just torn on which company to go with.
2 – Filing jointly, we are over the income limit. Are there any tax implications of doing a backdoor Roth IRA while also selling/buying a house in the same year?
3 – I’m rebalancing and trying to be smart with taxes. What would you do with 45k in cash? I was planning to invest $7k via backdoor Roth, but any other tax-advantage account options to invest the rest? If none, then just buy index funds in a taxable account?
4 – Sold most of my individual stocks to get the 45k cash (offset gains with losses, minimal cap gains tax). Still have more than double in big cap tech stocks, but 100%+ gains. Should I just slowly sell over the years to ease tax payments?
Appreciate the help!
Decided on Fidelity, but would still appreciate advice on the other questions while I wait for the transfers to clear. Thanks!
The word rebalance typically isn’t used when referring to selling a crummy investment and buying a good one by the way. More info here:
https://www.whitecoatinvestor.com/rebalancing-back-to-basics/
1. Depends on what you want. Both great firms. Fidelity generally best for service, Vanguard typically best for low costs. Our Roth IRAs are at Vanguard. Our 401(k)s and HSA are at Fidelity. Sorry if I didn’t help much.
2. No.
3. I would invest it according to my written investing plan.
https://www.whitecoatinvestor.com/investing/you-need-an-investing-plan/
Once you’ve exhausted your tax protected investing account options such as a personal and spousal Backdoor Roth IRA, your HSA, options provided by your employer such as 401(k)s, 403(b)s, 457(b)s, and options for your self-employment income such as individual 401(k)s, the rest gets invested in a taxable account.
4. These are called “legacy investments”.
https://www.whitecoatinvestor.com/legacy-holdings-in-taxable/
Hello, I am trying to confirm that two things would not disqualify me from this backdoor IRA. 1) I’ve inherited 1/3 of my physician father’s IRA and am receiving RMDs every year. 2) I contribute currently to a pension fund (not an IRA) and have previously contributed to a 403b. Thank you for any advice!
No and no.
Thank you! I’m also wondering- since this would be a recurring thing annually, would I need to leave the Traditional Roth open and do the same transfer every year? There is a rule about not having another IRA open in order to do the backdoor IRA, so not sure about how this would work in subsequent years…
Yes, use the same traditional and Roth IRA each year.
No, there is no rule about having another IRA open, only about having dollars in a traditional/SEP/SIMPLE IRA.
Fidelity did not ask/prompt me on whether to have taxes withheld or not – do you know if it defaults to not having taxes withheld (assume I’d see it in the form of a lower transferred balance)? Thanks!
I would hope so, but not 100% sure.
I deposited the $7,000 maximum to traditional IRA last month, its gained about $13 since then (from the money market, not from investing it). Do I still convert the entire balance? or just the original $7k?
Yes, the entire balance.
https://www.whitecoatinvestor.com/pennies-and-the-backdoor-roth-ira/
Apologies if mentioned elsewhere, but probably due to silly TikTok challenges, Fidelity did not allow me to transfer my money out from the traditional into Roth IRA accounts for about THREE WEEKS! Hopefully this is just because it’s my first time and won’t happen again next year. May be worth calling and checking the hold time at each company before depositing
3 weeks is pretty long, but it’s not unusual to have to wait a week at Vanguard.
Can I transfer money from my CMA account that has already settled ?
Sure.Why not?