Hello and Thank you very much for the very informative presentation. I am now subscribed to your channel and I hope to learn even more. I was wondering whether I could re-characterize a quantity that I’d previously ré-characterize? I mistakenly did the first in an attempt to convert a Traditional IRA into a Roth IRA. The custodian is telling me I cannot do so but however I’m not seeing any IRS guidance saying that. I see guidelines stating that reversing a conversion is prohibited but nothing stating a re-characterization isn’t reversible. I’m attempting to do this before the tax window closes. Any help greatly appreciated!
Thanks for the advice Tony! But what if I opened and funded a Roth IRA before opening the traditional one on Wealthfront? Am I still allowed to open the traditional IRA and make the backdoor conversion? And if so, can it be done in the middle of the year, or do I have to wait until the beginning of next year?
You likely won’t be able to reverse the Roth IRA contribution for this year but can attempt to do the backdoor contribution next year. Either way, reach out to our team for guidance.
@@wealthfrontvideos Hi Tony, I have one more question for you. My income fluctuates from year to year because I am a business owner, so I would like to know if it is possible to have a Roth IRA for the years when my income is below the threshold, as well as a traditional IRA for the years I go over it. Thank you in advance for your help!
In minute 4, you say if the contribution to the traditional IRA was with post-tax dollars, and that amount is converted to the Roth, there may not be tax implications. I am confused about how you know if you contributed with post-tax or pre-tax dollars - can you explain? Many thanks!
Found out that its only easy to do a one time backdoor roth on Wealthfront. Each time you do a backdoor on Wealthfront your traditional automatically closes. This is not convienent for those of us who want to make monthly backdoor roth contributions. Wouldn't want to open another account each month. Its also not very efficient on Wealthfront. There is no option to hold contributions in cash in the traditional before converting to roth. Instead, it automatically invests in the traditional. I guess I'll be looking for another option until Wealthfront makes regular backdoor roth conversions better.
Thanks for watching Taylor! You are correct in stating that, when you convert your Traditional IRA to a Roth IRA, it automatically closes the Traditional IRA. For clients that do the Backdoor Roth conversion each year, they typically just wait until the end of the year to convert the Traditional IRA to a Roth IRA. Can you clarify why you want to do it after each deposit?
@@wealthfrontvideos Yes. And maybe there is a lapse in my understanding. But I thought to avoid paying extra taxes you should convert your backdoor funds pretty much immediately. If the traditional account grows before I convert, than I'd have to pay taxes on those gains, no? And if I am waiting until the end of the year that could be a lot of growth and taxes. On the other hand, if the funds go straight to the roth through the traditional, those gains would have no taxes. Also, the roth contribution limit is 6k a year. Does that limit apply to backdoor conversions as well? Maybe there is someone at Wealthfront who can speak to me more about this (but maybe you have all the answers!), but I've seen other services (Schwab and Titan for example) that can take your traditional contributions in cash to be converted to roth as soon as you want. I plan to do contribute 500 a month to hit the 6k limit. Thanks for responding!
I think it would be helpful if you sent our support team an email at support@wealthfront.com either way. If there are gains on top of the initial contribution amount, yes you would owe capital gains taxes on those earnings. For this reason, many clients do a one-time contribution of 6k, then immediately convert it the next business day to avoid any potential taxes.The 6k limit applies to both types of IRAs so, in this case, yes it would only allow you to contribute 6k each year but you can certainly convert more than 6k if you'd like. It's just important to understand there may be tax implications in either case so I'd highly recommend reaching out to our team for clarification!
If all contributions are post-tax and your intention is the backdoor roth route, yes you may want to wait until you're ready to convert it all at once.
Hey Wealthfront/Tony, Thanks for all the content! A few suggestions: 1. Please get a collar mic or something, the volume changes in the voice are very off putting to hear 2. In addition to 1, please can you tone down the background music or just eliminate it altogether? 3. The audio needs to be softened/rounded, it's just harsh on the ears 4. Some visual aids would help, even just a whiteboard or something 5. If you can reduce the number of cuts/retakes, or atleast keep the positions of the camera the same, that would help make the videos feel smooth. Right now the zoom/distance changes and it's a bit jarring!
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Hello and Thank you very much for the very informative presentation. I am now subscribed to your channel and I hope to learn even more. I was wondering whether I could re-characterize a quantity that I’d previously ré-characterize? I mistakenly did the first in an attempt to convert a Traditional IRA into a Roth IRA. The custodian is telling me I cannot do so but however I’m not seeing any IRS guidance saying that. I see guidelines stating that reversing a conversion is prohibited but nothing stating a re-characterization isn’t reversible. I’m attempting to do this before the tax window closes. Any help greatly appreciated!
Hey Tony, can you do a backdoor conversion from a WF SEP IRA to a WF Roth IRA? Asking for a friend 😅
Thanks for the advice Tony! But what if I opened and funded a Roth IRA before opening the traditional one on Wealthfront? Am I still allowed to open the traditional IRA and make the backdoor conversion? And if so, can it be done in the middle of the year, or do I have to wait until the beginning of next year?
You likely won’t be able to reverse the Roth IRA contribution for this year but can attempt to do the backdoor contribution next year. Either way, reach out to our team for guidance.
@@wealthfrontvideos Hi Tony, I have one more question for you. My income fluctuates from year to year because I am a business owner, so I would like to know if it is possible to have a Roth IRA for the years when my income is below the threshold, as well as a traditional IRA for the years I go over it. Thank you in advance for your help!
In minute 4, you say if the contribution to the traditional IRA was with post-tax dollars, and that amount is converted to the Roth, there may not be tax implications. I am confused about how you know if you contributed with post-tax or pre-tax dollars - can you explain? Many thanks!
Post tax would just mean that you don’t take a tax deduction for the contribution. Otherwise, if you take the deduction, it’s pre tax.
Can you do this every year? Or only once?
Every year
Found out that its only easy to do a one time backdoor roth on Wealthfront. Each time you do a backdoor on Wealthfront your traditional automatically closes. This is not convienent for those of us who want to make monthly backdoor roth contributions. Wouldn't want to open another account each month. Its also not very efficient on Wealthfront. There is no option to hold contributions in cash in the traditional before converting to roth. Instead, it automatically invests in the traditional. I guess I'll be looking for another option until Wealthfront makes regular backdoor roth conversions better.
Thanks for watching Taylor! You are correct in stating that, when you convert your Traditional IRA to a Roth IRA, it automatically closes the Traditional IRA. For clients that do the Backdoor Roth conversion each year, they typically just wait until the end of the year to convert the Traditional IRA to a Roth IRA. Can you clarify why you want to do it after each deposit?
@@wealthfrontvideos Yes. And maybe there is a lapse in my understanding. But I thought to avoid paying extra taxes you should convert your backdoor funds pretty much immediately. If the traditional account grows before I convert, than I'd have to pay taxes on those gains, no? And if I am waiting until the end of the year that could be a lot of growth and taxes. On the other hand, if the funds go straight to the roth through the traditional, those gains would have no taxes. Also, the roth contribution limit is 6k a year. Does that limit apply to backdoor conversions as well? Maybe there is someone at Wealthfront who can speak to me more about this (but maybe you have all the answers!), but I've seen other services (Schwab and Titan for example) that can take your traditional contributions in cash to be converted to roth as soon as you want. I plan to do contribute 500 a month to hit the 6k limit. Thanks for responding!
All my contributions would be post-tax fyi. So maybe that would mean its ok to wait until the end of the year and I wouldn't pay extra tax? Not sure.
I think it would be helpful if you sent our support team an email at support@wealthfront.com either way. If there are gains on top of the initial contribution amount, yes you would owe capital gains taxes on those earnings. For this reason, many clients do a one-time contribution of 6k, then immediately convert it the next business day to avoid any potential taxes.The 6k limit applies to both types of IRAs so, in this case, yes it would only allow you to contribute 6k each year but you can certainly convert more than 6k if you'd like. It's just important to understand there may be tax implications in either case so I'd highly recommend reaching out to our team for clarification!
If all contributions are post-tax and your intention is the backdoor roth route, yes you may want to wait until you're ready to convert it all at once.
Hey Wealthfront/Tony,
Thanks for all the content!
A few suggestions:
1. Please get a collar mic or something, the volume changes in the voice are very off putting to hear
2. In addition to 1, please can you tone down the background music or just eliminate it altogether?
3. The audio needs to be softened/rounded, it's just harsh on the ears
4. Some visual aids would help, even just a whiteboard or something
5. If you can reduce the number of cuts/retakes, or atleast keep the positions of the camera the same, that would help make the videos feel smooth. Right now the zoom/distance changes and it's a bit jarring!
Thanks for watching and taking the time to provide the feedback!