[USER]

Ask for help: Can someone please explain how to do a back door Roth from step 0 aka explain it like I am 5?

I searched the have searched online but just do not understand how to start and/or why I should have one. Where should I open one?

Will it impact my taxes?
For context, my partner got laid off so we have just my income, and I make over the threshold to contribute to a Roth.

I have a retirement plan at work that I contribute to monthly and my employer matches, and have a HYSA. I have no other investing accounts (but I’m open to it!!).

I grew up in very modest conditions with 0 financial education and am trying to hard to learn and make better decisions.

Partner will stay home because we just had a baby and we live in a HCOL area and childcare is expensive and they have already applied to hundreds of jobs with no luck.

Thank you so much for anyone who takes the time to respond.

[Karen]

Where are the funds coming from? Will it be post-tax money earned? Separately, do you have an existing Traditional IRA with pre-tax money? This makes it a bit more complicated.

I just did a Backdoor Roth for the first time ever last December and it was very simple with Fidelity once I cleared any other funded Traditional IRA (by rolling 100% of those funds to my 401k).

These are the steps I followed:
1. Roll over the full balance of my existing Vanguard Traditional IRA to my current 401k plan (that way I had no tax implications due to the ProRata rule for existing pre-tax money in an IRA)

2. Opened a new Traditional IRA account with Fidelity.

3. Funded the Fidelity Trad IRA to the 2024 limit of $7000

4. Waited for the funds to clear (took about 3 weeks with Fidelity due to new fraud rules, used to take a couple of days but I digress)

5. Opened a new Roth IRA account with Fidelity

6. Called Fidelity, talked to rep to request a Backdoor Roth. Rep processed it in a matter of minutes

That’s it. I funded the $7000 with post-tax money and I am not expecting to incur any extra taxes as the taxes were already paid on that money.

Hope that helps! I believe Vanguard allows you to to the Backdoor Roth conversion yourself, though I’ve never tried.

I went with Fidelity because I prefer their customer service, the website interface, and wanted to invest on Fidelity funds (FSKAX)

[George]

Open a traditional IRA account (not a Roth IRA). Put money into the traditional IRA. This is called a “non-deductible contribution” because you’ve already paid taxes on the money.

Convert the traditional IRA to a Roth IRA. This is the “backdoor” part. You’ll pay taxes on the gains, but not on the original amount you contributed.

Repeat the process each year if you want to.

you might owe taxes on the gains when you convert the traditional IRA to a Roth IRA.

[Neha]

There are step by step videos on youtube on doing a backdoor roth.

[Author]

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