A Backdoor Roth IRA is a method where you make a nondeductible contribution to a Traditional IRA and then do a Roth conversion to a Roth IRA, allowing someone to contribute to a Roth IRA if they are over the income limits.
This video will show you how to perform a backdoor Roth IRA step-by-step and guide you through the process with Fidelity Investments.
I do this process every year with my own Roth IRA in Fidelity, and in the first part of this video, I explain the backdoor Roth IRA and why you may want to consider doing one and the steps I take at the beginning of every year to contribute to not only my backdoor Roth IRA, but also my HSA.
As I perform my contributions once per year and both of these accounts are at Fidelity, this process is incredibly easy and convenient.
This was my first video on this channel in 2022, and it was so popular throughout the year that I decided to remake this video with all of your FAQs baked in with some improved video editing to make things much more clear. I hope you enjoy this video and that it’s helpful for you if you decide to do your backdoor Roth with Fidelity!
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Chapters:
00:00 Intro
00:24 My Retirement Strategy
05:14 Backdoor Roth Guide
10:11 Outro
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Disclaimer: I am not a financial advisor, accountant, or lawyer, and as such, I do not provide financial, tax, or legal advice. This video, and any ideas presented in it, are opinions and are provided for entertainment purposes only. Please do your own research and consult your own financial, tax, or legal professional for specific advice.
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The Fidelity Backdoor Roth IRA is a great way to maximize your retirement savings. It allows you to contribute to a Roth IRA even if your income is too high to qualify for a traditional Roth IRA. This guide will show you step-by-step how to open and fund a Fidelity Backdoor Roth IRA.
Step 1: Open a Traditional IRA
The first step is to open a Traditional IRA with Fidelity. You can do this online or by calling a Fidelity representative. When opening the account, make sure to select the option to make after-tax contributions as this will be important later when you convert the funds to a Roth IRA.
Step 2: Fund the Traditional IRA
Once you have opened your Traditional IRA, you can begin funding it. You can contribute up to $6,000 per year ($7,000 if you are age 50 or older). Make sure that you are making after-tax contributions as this will be important later when you convert the funds to a Roth IRA.
Step 3: Convert to a Roth IRA
Once you have funded your Traditional IRA, you can then convert the funds to a Roth IRA. You can do this online or by calling a Fidelity representative. When you convert the funds, make sure to select the option to convert after-tax contributions as this will be important later when you withdraw the funds tax-free.
Step 4: Withdraw Funds Tax-Free
Once you have converted the funds to a Roth IRA, you can begin withdrawing the funds tax-free. You can do this at any time, but you must wait at least five years after the date of your first contribution before you can withdraw the funds penalty-free.
The Fidelity Backdoor Roth IRA is a great way to maximize your retirement savings. By following these steps, you can easily open and fund a Fidelity Backdoor Roth IRA and begin enjoying the benefits of tax-free withdrawals.
Hi, If you max out your fidelity 401 work contribution at one job and max out 457 plan at another work place can you still do backdoor IRA Roth with fidelity ? Thank you so much
Hey boss this is a great resource. This is my FIRST year having to do this because I exceed the MAGI limit in tax year 2022.
Very quick question that I hope is straightforward enough:
I am going through the process of doing this for tax year 2022, so let me know if I have this straight. I know I cannot directly do the Roth conversation for "tax year 2022" since I missed the December 31 2022 conversion deadline. Does that matter..? If I understand all this correctly (and going into Fidelity myself right now in Feb 2023), I'm able to still open/fund a Traditional IRA for tax year 2022. So two questions here: 1) Can the 2022 Traditional IRA funds that I just put $6k in, be transferred to my already-existing Fidelity Roth IRA (that I just started back in tax year 2021 so there's barely anything there) that simply, no questions asked? Or will it only let me do it as a contribution in my Roth IRA counting for tax year 2023? If there is no "specify which tax year" the transfer will take place and it just transfers the traditional ira monies straight to my roth ira account then great, (2) Am I still able to do my normal Roth IRA contribution for tax year 2023 (again, contribution, not transfer)? And yes, I expect to be under the MAGI limit when I do my taxes next year in 2023.
Thanks!
Thank you for making this step-by-step video. It is super useful!
Dammit! How have I missed this for so many years! Just did it. Thanks!
Thanks for the great video! Is there an advantage to put post-tax dollars into HSA vs. pre-tax payroll deductions?
This is great. Really thorough and well done.
Thanks for Video. Does the cash balance need to be as of 12/31/2022? Or can I transfer to cash account in February 2023?
If you're transferring money from your bank to your fidelity account, isn't it already taxed then?
This is exactly what I was looking for. The amount of detail you provided was perfect. I was thinking how to I change my core position and then you showed how! Fantastic content.
Let's say you already have X amount in your traditional IRA that you contributed last year but did not convert to Roth IRA. Can you convert 6500 + X to Roth IRA this year? My research shows yes I can, but I will have to pay taxes on the gains. I would like your thoughts on this though. Thank you!
Thanks for the video! I’m wondering if it’s okay to directly transfer money from a bank account to traditional IRA?
Very clear instruction
What can you do about the interest gained while the money sat in Traditional IRA before converting to Roth IRA? I converted in mid-January then at the end of the month there was a new balance of $5.25.
At 02:31, you said “the strategy is not an option if you have other funded iras”. So the Roth IRA can have funds by Dec 31, but the traditional Ira needs to be at $0 if this is the case? Did I get that correctly
Why do we need to transfer from a cash management account? rather than deposit directly into the traditional Ira, and then transferred to the Roth IRA
This was a super helpful video. I've always been curious as to how to actually perform one of these. Since I am still eligible to contribute to a Roth IRA without needing to use the backdoor method, I'm set for now, but this will be super good to look back on in the future. Now I just gotta get my income up!
Stan, You are the BEST!. I just want to be clear I understand. The ONLY way NOT to pay taxes on "Back Door Roth IRA deposit" is only if that person does NOT HAVE ANY IRA with monies in IRA in their name? So, if I contributed to a IRA in years past, I would NOT qualify and have to pay takes on the ROTH IRA contribution for the year it was deposited(with the exemption of Inherited IRA)?
Hi Stan,
I saw your cmt about getting a pop up by amex before. How do u get out of it? I got 2 amex charge card in the last 6 months and decide to apply for hilton aspire and got the pop up. Been watching all your videos. Keep up the good work.
Did you implement the sound processing in this video? The audio sounds so good! I can see this video being a very good evergreen video. I’ll definitely come back to this once my income exceeds that threshold.
Nice video. I do backdoor too. Probably helpful if you show how to do mega backdoor Roth IRA as well. Do you plan to do a video about filing taxes after doing backdoor Ira ?
Great video Stan! Btw, I’m able to do the conversion with the core position of SPAXX with no problem. Do you have anymore information about why this wouldn’t work for you?
Do you live in CA? Can you do a video on how you manage CA taxes in an HSA, while being tax free federally?
This is an awesome video here Stan! And even though I'm not currently in the high-income bracket, it'll surely be super helpful for all those high-income earners that make more than $138K and still want to contribute to a Roth.
For tax season, you attach tax form 8606 with this for every year that you do this?
Now that you’re engaged, you can no longer contribute to your INfidelity account hahaah.
This was a great step by step, I actually have never done it and was wondering the process in case anyone asked me.
Now you need the Schwab so you can deposit that 1.1c straight to the Roth with no impact to the $6500.. which was mind blowing when I found out you can do that!
Wait, did I miss it? What is the point of the backdoor vs just the traditional?
Great video Stan! Loved this actually!
This was very helpful video. I was looking for something like this for a while. Thanks and Keep up the good work Stan!
Thanks for this video. It served as a good reminder for me to do the same!
Great information Stan! I can definitely see this video being an evergreen video based on how clear and well explained the information is!
Great guide I used to have to do backdoor Roth IRAs when I used to invest in equities. This brought back some memories.
Where was this video 3 years ago! Great video Stanley. This will help people for years and years into the future.
This was an excellent step by step guide Stanley! Roth IRAs are such a great addition to pretax retirement accounts.. I've been doing my backdoor roth IRA for the past few years with Vanguard.
first!