2018: First Financial Task Completed?

[disneysteve]

For various reasons, I did not fully fund our Roths in 2017 before the end of the year. One reason was that I wasn't positive what our income would be and was afraid we might hit the limit at which we couldn't contribute the full amount. Since that didn't happen, I need to catch up and get the 2017 money in.

I just added $2,000 ($1,000 for each of us). We only have $2,000 left to put in which I should be able to do with my next paycheck.

I just put in the final $2,000 into our Roths for 2017 so that's done. Now to start working on 2018.

I think it's the first time we didn't fully fund the accounts in the calendar year, but I was contributing to a 401k which is new to me so it isn't like I wasn't saving for retirement. I actually put more in retirement accounts in 2017 than I ever have due to that.

[corn18]

I just did my mega back door Roth from my after tax 401k contributions. Another $19k into the Roth accounts. I'll add another $12k through the regular tIRA - Roth back door in March.

I really like having a Roth IRA. The contributions can be withdrawn at any time with no penalty. No RMD's. And my plan right now is to let it sit there and grow for my heirs because the withdrawals will be tax free for them (contributions AND earnings).

[scfr]

Today DH & I finalized our 2018 budget, I created sheets for tracking spending, and made a new folder for both.

January is our biggest spending month. In addition to making the 4th estimated tax payment for 2017, we've paid our annual property tax bill (no mortgage so no escrow account), and paid for the inspection & license renewal of one of our vehicles.

Even though the two tax items always make me kind of *gulp* nothing was a surprise and had been planned for in advance. All I had to do was make sure money got transferred from savings to checking and that everything got inspected, filed, and paid on time.

Also - I'm trying out a new planner this year. I could not survive (financially and otherwise) without a calendar to keep track of things, and I prefer paper when it comes to my planner.

[Like2Plan]

I just did my mega back door Roth from my after tax 401k contributions. Another $19k into the Roth accounts.

Is there any strategy for the timing on your mega back door rollover to Roth? Do you do more than 1 per year? If you do, do you get tax forms for each rollover event or do they keep a running total for the year?

DH just did his first one on 4 Jan. (We were waiting until he had enough to qualify for a premium class index fund). The distribution letter said "return of after tax contribution" even though it was a direct rollover (still wondering if we did something wrong ) The gains were rolled over to a tIRA, so I'm not sure what tax paperwork this will generate.

[LivingAlmostLarge]

I also contributed to our 2017 and 2018 back door roth ira and I also contributed to both kids Coverdell ESA. $30k done.

[corn18]

Is there any strategy for the timing on your mega back door rollover to Roth? Do you do more than 1 per year? If you do, do you get tax forms for each rollover event or do they keep a running total for the year?

DH just did his first one on 4 Jan. (We were waiting until he had enough to qualify for a premium class index fund). The distribution letter said "return of after tax contribution" even though it was a direct rollover (still wondering if we did something wrong ) The gains were rolled over to a tIRA, so I'm not sure what tax paperwork this will generate.

Not a market timer at all, so I just do what my Investment Policy Statement (IPS) says: mega back door Roth in January (once per year). I could do it every day or every other year or wait until I retire, but I set my IPS at once a year in January.

Back door Roth is always March to coincide with bonuses. I could fund them now, but I follow my IPS to keep me from being emotional.

No idea on taxes. I do pay the taxes on the earnings in the mega back door Roth so I don't have to roll the tIRA back into my 401k. Holding a mixed bag of tIRA and doing backdoor Roth's is a PITA that I don't want to deal with.

[Like2Plan]

Not a market timer at all, so I just do what my Investment Policy Statement (IPS) says: mega back door Roth in January (once per year). I could do it every day or every other year or wait until I retire, but I set my IPS at once a year in January.

I wasn't thinking so much of market timing, but I could see an advantage to doing the rollover right after the contribution is made so there are fewer potential gains on which to pay taxes (if you do the conversion of the gains to Roth option). But having never done this before I don't know if it would generate a ton of paperwork for next years' taxes. (I do our taxes, so I don't want to make things more complicated than they need to be. )

[corn18]

I wasn't thinking so much of market timing, but I could see an advantage to doing the rollover right after the contribution is made so there are fewer potential gains on which to pay taxes (if you do the conversion of the gains to Roth option). But having never done this before I don't know if it would generate a ton of paperwork for next years' taxes. (I do our taxes, so I don't want to make things more complicated than they need to be. )

Gotcha. Very good point. With my mega backdoor Roth, I contribute a percentage of my pay per month, not a lump sum. So I have to accept any gains or losses when I do the in service roll over to my Roth.

For my backdoor Roth, I contribute $6500 to my tIRA and $5500 to my wife's spousal tIRA and then 2 days later I roll it to the Roth to minimize taxable gains.

[LivingAlmostLarge]

Corn are you sure it's worth doing the mega back door roth? How much are you putting in?

[corn18]

Corn are you sure it's worth doing the mega back door roth? How much are you putting in?

Putting in about $17k per year into the mega back door Roth. Maybe worth it for me. I’ll have enough in taxable when I retire to cover my expenses. I may have to tap my 401k if I hit a sequence of returns risk (market drops 40% the day after I retire). 401k is also for splurging in retirement or to buy cars and long term medical. I don’t need the Roth money so it can sit there and grow for 30+ years with no RMDs. Then my heirs can have it all tax free. If it were in my taxable account, it would be the same because they get a step up in basis upon my death, so maybe it’s a wash between taxable and Roth. I guess the Roth comes out on top of taxable if I need the money before my wife and I die. If we pull that money out of the Roth, it is tax free. If we pull money out of taxable, we pay capital gains. So the Roth gives me flexibility.

[Like2Plan]

I don’t need the Roth money so it can sit there and grow for 30+ years with no RMDs. Then my heirs can have it all tax free. If it were in my taxable account, it would be the same because they get a step up in basis upon my death, so maybe it’s a wash between taxable and Roth.

I'm thinking the Roth has an advantage (for the category of index funds, anyway) because you are not taxed on the inevitable yearly dividends and capital gains like you are on index funds held in a taxable account. And, your heirs can stretch this benefit out over their lifetimes with an inherited stretch IRA.

[Like2Plan]

...are you sure it's worth doing the mega back door roth?

I noticed that you contributed to 2017 and 2018 back door Roths for you and your DH. What do you see is the downside to using the mega back door Roth for your DH?

[disneysteve]

I did a little more rebalancing today.

I moved about 0.5% from domestic to international equities as we have been under-invested in foreign stocks.

I also moved about 1% from stocks to bonds as our stock allocation had gotten a bit out of whack thanks to 20-30% returns last year in many of our funds.

Both of these changes were in tax-sheltered accounts so there was no tax impact and no fees involved.