Monday, January 6, 2020

IRA to Roth IRA Conversion Part 2

Retirement Gremlin here to talk about the long term process I am undertaking to slowly convert my IRA holdings to Roth.  This is the second 'backdoor' account conversion I have initiated.  My first conversion and the underlying strategy can be found here.

Strategy: to avoid unnecessary taxable events, I will move around 1 to 2 "positions" a year.  At this rate I will be able to move the whole IRA to my Roth by the time I am 59. This is of course to maximize growth and minimize taxes.

Process: Since my accounts are all at the same brokerage, I can for no fee transfer single positions after a few mouse clicks.

Part 2:

For my second conversion I moved my entire position in CVS (25 shares - $1876 value) and part of my position in MMM (5 shares - $882.10 value). With this conversion, I am effectively moving $78.80 in forward dividends from my SEP IRA to my ROTH accounts.

Part 3 will happen next calendar year.

All changes will be reflected in my portfolio at the end of the month.

- Gremlin
- Long CVS and MMM


  1. This whole IRA/ROTH business gets my head spinning sometimes. We have a legacy IRA that I thought about converting to a ROTH but after talking with my tax guy I decided to just let it be for the foreseeable future. The IRA is not that large and it holds all my REITs and the effort to convert I thought wasn't worth it. I'm definitely focused a lot more on my taxable account. I just like the idea of paying taxes every year but having access to my money w/o any strings attached. One of the reasons we never opened a 529 for baby DivHut rather a regular taxable custodial account.

    1. DH,

      Thanks for the comment. I thought the same thing, but I decided to ask my brokerage (ETrade) and they said the process is easy. So my plan is to slowly convert it. Seeing minimal tax hits each year, so by the time I am 59 the Roth will be much bigger and the IRA will be a quick swipe into the new account.

      That said I am also focused on my taxable account. The conversion though allows me to start concentrating all my retirement into one place. Focused asset allocation (in terms of reinvesting dividends) can be a big thing.

      I thought about that too for my kids - doing a taxable account. I went with a 529 though because then it forcing the kids into completing a good education ;) - or getting a house. I still might open a custodial account for them, but my goal is to use that as a moment to teach them a little later so we can 'invest together.'

      - Gremlin