How (and why) To Do a Backdoor Roth IRA Contribution (+ Fidelity walkthrough)

This video describes how (and why) to do a backdoor Roth IRA contribution and includes a walkthrough of the process at Fidelity.
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[@J_pearce01]

I’ve seen other videos where they have a few dollars of interest accumulated so they would convert 7k and have like $3 left in the traditional IRA. Is that okay or do I absolutely need to have a zero balance. This will be my first time ever contributing to a Roth IRA so I’m trying to make sure I get it right

[@frugal.professor]

If you delay the Trad=>Roth conversion, you'll have the accumulated interest issue you mention. In that case, it'd be best to convert the full Trad IRA balance (e.g. $7,003 in your example). Following this example, you'd pay taxes on the $3 of gains but not the $7k. Hence, it's better to convert ASAP. I literally do it 30 seconds after the Trad contribution.

[@Bloawe123]

Can I still do the backdoor roth ira conversion to contribute to 2023 roth ira? I’m so confused because deadline of 2023 conversion to roth ira is 12/31/2023 according to google.

[@frugal.professor]

These articles answer your question. The Finance Buff is as smart as they come:
* thefinancebuff.com/backdoor-roth-turbotax-recharacterize-convert-first-year.html
* thefinancebuff.com/backdoor-roth-turbotax-recharacterize-convert-second-year.html

[@TravinaSingh]

Can you make a video about the mega back door Ira contributions through an employers 401k?

[@frugal.professor]

I've unfortunately never had access to the elusive Mega Backdoor Roth, but I understand the mechanics to be similar to what I show in this video. Sorry I can't help further. I've been actively lobbying my employer to change their employer for 8 years with no success..

[@kevinwoodrobotics]

Great video! How long have you been investing?

[@frugal.professor]

My wife and I started investing 20 years ago.

[@stacysays]

if you don't have any earned income, can you take $ from a savings account and do this strategy?

[@frugal.professor]

You need earned income to contribute to any IRA. The amount you can contribute to an IRA is =min(earned income, $7,000)) for ages = 50.

[@stacysays]

@@frugal.professor Darn! thanks for your answer

[@realroboto1]

Thank you for continuing with your channel.

[@scottpapasodoro5598]

Thank you this is awesome. Can you do the mega back door with any 401k?

[@frugal.professor]

No, your employer has to allow it. But don't ask HR or your 401k recordkeeper if they offer the "mega backdoor roth" since they won't know what you're talking about. Instead, ask for the following features:
* Non-Roth, after-tax contributions, and
* In-plan Roth conversions (or rollovers)
If you have the above two, you're in business. Tens of thousands of dollars of extra roth space per year.
Regretfully, my employer doesn't offer this option.... I've been lobbying to change this for years without success.