Backdoor Roth Best Practice
Hello-
When doing a Backdoor Roth, is it best practice to purchase an investment in the IRA with the funds and then convert to the Roth? Or can you immediately after the money is received at the IRA convert the cash to the Roth?
Thank you!
Permalink Submitted by Alan - IRA critic on Tue, 2020-10-27 16:53
Once you make the ND TIRA contribution, if you will be able to convert right away (eg within a month) you should keep the contribution in the settlement fund. However, for some people that need to roll pre tax IRA balances over to their employer plan or even have to wait a couple years for their next employer if the current one will not accept IRA rollovers, then you would invest the ND contribution. By the time you convert there will be a gain or loss on that contribution. If there is a gain, you could either include the gain with the amount you roll over to your employer plan, or convert it and pay taxes on the gain. If there is a loss, you will have less to convert and will have some TIRA basis left over for future use.