{"id":194723,"date":"2023-08-01T12:32:11","date_gmt":"2023-08-01T17:32:11","guid":{"rendered":"https:\/\/am22tech.com\/?post_type=usa_money&p=194723"},"modified":"2024-02-29T11:28:48","modified_gmt":"2024-02-29T17:28:48","slug":"backdoor-roth-ira-fidelity","status":"publish","type":"usa_money","link":"https:\/\/www.am22tech.com\/usa\/money\/backdoor-roth-ira-fidelity\/","title":{"rendered":"How to do a Backdoor Roth IRA at Fidelity?"},"content":{"rendered":"\n

#1 Open a Traditional IRA account<\/h2>\n\n\n\n

The first step is to open a traditional IRA account and not a Roth account directly. If you already have an account, jump to the next step.<\/p>\n\n\n\n

Visit the Fidelity.com<\/a> website and click on ‘Open an Account’.<\/p>\n\n\n\n

Fidelity offers $100 as promotional money if you use coupon code FIDELITY100.<\/p>\n\n\n\n

\"Fidelity
Open a Fidelity traditional IRA account<\/figcaption><\/figure>\n\n\n\n

Click on the ‘Open a Traditional IRA<\/strong>‘ button. <\/p>\n\n\n\n

Read the terms and conditions and then click the ‘Open Account<\/strong>‘ button.<\/p>\n\n\n\n

\"Fidelity
Fidelity traditional IRA account terms and conditions<\/figcaption><\/figure>\n\n\n\n

Once your account is open (which takes less than a minute online), you will be presented with the option to fund this account.<\/p>\n\n\n\n

\"Add
Add money to Fidelity traditional IRA account<\/figcaption><\/figure>\n\n\n\n

I suggest linking your bank account with this traditional IRA account to easily transfer money. I used the direct login method as shown below (using Plaid).<\/p>\n\n\n\n

\"Fidelity
Fidelity – Connect a bank account<\/figcaption><\/figure>\n\n\n\n

You can start the money transfer immediately after you have connected your bank account. <\/p>\n\n\n\n

    \n
  • Tax Year 2023 – $6,500 if you’re under age 50 \/ $7,500 if you’re age 50 or older.<\/li>\n\n\n\n
  • Tax Year 2024 – $7,000 if you’re under age 50 \/ $8,000 if you’re age 50 or older.<\/li>\n<\/ul>\n\n\n\n

    This limit changes every year. <\/p>\n\n\n\n

    I suggest putting the maximum allowed amount to it to get the most benefit out of Roth IRA’s tax-free growth.<\/p>\n\n\n\n

    \"Fidelity
    Fidelity – transfer money to traditional IRA<\/figcaption><\/figure>\n\n\n\n

    At this point, your traditional IRA account is open and has the money needed to move it to a Roth IRA.<\/p>\n\n\n\n

    Points to note:<\/strong><\/p>\n\n\n\n

      \n
    • First-time traditional IRA account<\/strong>: \n
        \n
      • If you have opened this account for the first time with Fidelity, it will take about 5-6 days to show this money as ‘available’ in your traditional account.<\/li>\n\n\n\n
      • The amount may keep showing as transferred from your bank to fidelity, but until it is marked as ‘available’, you cannot transfer it to a Roth IRA.<\/li>\n<\/ul>\n<\/li>\n\n\n\n
      • Already have a traditional IRA account<\/strong>:\n
          \n
        • The money may be transferred immediately or within 1 day and may show as ‘available’ the next day.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n\n\n\n

          #2 Open a Roth IRA account<\/h2>\n\n\n\n

          Our next step is to open a ROTH account.<\/p>\n\n\n\n

          Visit Fidelity’s open account page once again and click on the ‘Open Roth IRA’ account button.<\/p>\n\n\n\n

          \"Fidelity-
          Fidelity- Open Roth IRA account<\/figcaption><\/figure>\n\n\n\n

          Follow the next steps to open the account.<\/p>\n\n\n\n

          When you reach the ‘fund this account’ or transfer money to this account step, just close and do not do anything.<\/p>\n\n\n\n

          For backdoor Roth, we need to specifically move money from ‘bank account’ to ‘traditional IRA’ AND then to ‘Roth IRA’ and not directly from a bank account to ‘Roth IRA’.<\/p>\n\n\n\n

          Bank account -> Traditional IRA -> Roth IRA<\/strong><\/p>\n\n\n\n

          #3 Transfer money from Tradition to Roth account<\/h2>\n\n\n\n

          Now, wait for the money to show up as ‘Cash available to withdraw<\/strong>‘ in your traditional IRA account. If it shows zero, then you need to wait.<\/p>\n\n\n\n

          \"Fidelity-
          Fidelity- Transfer IRA account – cash not available<\/figcaption><\/figure>\n\n\n\n

          Once it is available, start the transfer process. <\/p>\n\n\n\n

          Click on the ‘Transfer Money’ button.<\/p>\n\n\n\n

            \n
          • Select the ‘Traditional IRA’ account as the first account.<\/li>\n\n\n\n
          • Select the ‘Roth IRA’ as the second account where the money needs to go.<\/li>\n<\/ul>\n\n\n\n

            Make sure that the amount shows as ‘available’.<\/p>\n\n\n\n

            \"Fidelity-
            Fidelity- Transfer IRA account cash available to withdraw<\/figcaption><\/figure>\n\n\n\n

            Click the ‘Continue’ button and you will be asked if you want to keep the ‘traditional account’ open or close it.<\/p>\n\n\n\n

            I suggest keeping the account open as you can use it next year for the same backdoor roth process again.<\/p>\n\n\n\n

            \"Fidelity-
            Fidelity- Transfer all money and keep the account open<\/figcaption><\/figure>\n\n\n\n

            The last step is to review and submit the transfer. <\/p>\n\n\n\n

            Note that the amount is always shown as SPAXX (Core) Fidelity Government Money Market<\/strong> instead of cash. This is fine as this is treated as cash for transfers from one account to the other.<\/p>\n\n\n\n

            Once you have the money transferred, you can buy stocks using this Roth account.<\/p>\n\n\n\n

            \"Fidelity-
            Fidelity- Review traditional to Roth IRA transfer<\/figcaption><\/figure>\n\n\n\n

            FAQ<\/h2>\n\n\n\n
            Why does my traditional IRA cash show as a SPAXX fund?<\/strong>

            Fidelity calls its cash a ‘core position’. For a traditional IRA account, whenever you add any cash, it will automatically be moved to a SPAXX balance.

            I got the panic too when I was trying to do a backdoor Roth IRA and saw that traditional IRA cash was moved to SPAXX automatically.

            I did reach out to Fidelity customer care and they confirmed that we cannot stop or change the SPAXX in traditional IRA. The system automatically moves all cash to SPAXX.

            \"Fidelity-<\/p> <\/div>

            What is the best time to do a backdoor Roth IRA?<\/strong>

            The contribution to a traditional IRA can be made between 1 Jan to 15 April of next year. It does not matter if you file an extension for your tax return, the deadline is still 15 April.

            Example: For the year 2023, the contribution to a traditional IRA can be done anytime between 1 Jan 2023 to 15 April 2024<\/strong>.

            To move this money from a traditional to a Roth IRA account, you can do it anytime. I suggest moving the money from traditional to Roth anytime before 31 Dec.<\/p> <\/div> <\/div>\n<\/i>\r\n\t\t\t\t<\/span>\r\n\t\t\t<\/span>

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