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OK,I'm going to try asking this again because I still can't quite find the answer online, perhaps because it's so simple.

I am now old enough for an IRA contribution of $7,000 per year with catch-up amount in 2019.

My income is too high to allow for a deductible contribution to a Traditional IRA or any contribution directly to a Roth IRA.

I do not currently have a traditional IRA(I do have an old Roth and an employer 401K).

If I put $7,000 after taxes (not deductible for me) in a Traditional IRA and within a week or so immediately roll it over into a new Roth, with minimal or no gain in the account during that week, it seems like there would be negligible tax implications (I am in a high bracket and likely to be there even in retirement. I know I will have to wait five years to take a distribution from this Roth without penalty).

Am I missing something? Pitfalls?
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I am now old enough for an IRA contribution of $7,000 per year with catch-up amount in 2019.

My income is too high to allow for a deductible contribution to a Traditional IRA or any contribution directly to a Roth IRA.

I do not currently have a traditional IRA(I do have an old Roth and an employer 401K).

If I put $7,000 after taxes (not deductible for me) in a Traditional IRA and within a week or so immediately roll it over into a new Roth, with minimal or no gain in the account during that week, it seems like there would be negligible tax implications (I am in a high bracket and likely to be there even in retirement.


You would pay taxes (at ordinary income rates) only on gains that would be converted. If there were little/no gains, there would be little/no tax due.

I know I will have to wait five years to take a distribution from this Roth without penalty

Not necessarily. Once you reach 59 1/2, if you have had ANY Roth IRA open for at least 5 years, your distributions will be qualified, so there is no '5 year clock' on the converted amount. And again, you don't have to open a new Roth IRA for this conversion. You may put the conversion directly into your 'old' Roth IRA.

Here are the requirement for qualified distributions from IRS Pub 590-B https://www.irs.gov/pub/irs-pdf/p590b.pdf

What Are Qualified Distributions?

A qualified distribution is any payment or distribution from your Roth IRA that meets the following requirements.

1. It is made after the 5-year period beginning with the first taxable year for which a contribution was made to a Roth IRA set up for your benefit, and

2. The payment or distribution is:
a. Made on or after the date you reach age 59 1/2,
b. Made because you are disabled (defined earlier),
c. Made to a beneficiary or to your estate after your death, or
d. One that meets the requirements listed under First home under Exceptions in chapter 1 (up to a $10,000 lifetime limit).


Assuming you have had your 'old' Roth IRA open for at least 5 years at the time you take the distribution, you meet requirement #1. If you are over 59 1/2 when you take the distribution, then you will meet requirement #2. So, unless you are currently under 54 1/2, then you won't need to wait 5 years to make tax-free withdrawals of any conversions you do.

AJ
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Thanks for the exceptionally clear reply. That also makes this something of a no-brainer, I guess. I've had this Roth for many years and will hit the magic age in 3. Though maybe not ready to make withdrawals.
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Thanks for the exceptionally clear reply. That also makes this something of a no-brainer, I guess.

You're welcome. Yes, if you have no Traditional IRAs and were going to be saving/investing the $7,000 anyway, then it pretty much is a no-brainer to do a back-door Roth while you are still working. Putting the money into a tax-free account still beats putting it into a taxable account in the long run. If you are married, and your spouse also has no Traditional IRAs, keep in mind that they can do a back-door Roth, too.

I've had this Roth for many years and will hit the magic age in 3. Though maybe not ready to make withdrawals.

Keep in mind that you after you quit working, you can do conversions from your 401(k) account, either into a Roth 401(k) if your plan allows that option, or into your Roth IRA. Especially if you will be in a lower tax bracket than when you were working, it will be a way to pay less tax than you saved while making pre-tax Traditional 401(k) contributions, and will also help to lower your RMDs.

AJ
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AJ,
There are two 5 year rules. One applies to conversions. Each conversion has its own qualifying 5 year period.
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There are two 5 year rules. One applies to conversions. Each conversion has its own qualifying 5 year period.

Yes, there are two different 5 year rules. But the one that applies to conversions is only used if the distribution is not a "Qualified" distribution, and you have to use the ordering rules to see if the distribution is taxable. Once someone turns 59 1/2, and they have had a Roth account open for at least 5 tax years, they meet the requirement for "Qualified" distributions, and the 5 year clock for conversions is disregarded.

AJ
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