I have a self-managed Vanguard traditional IRA account that I contribute to yearly. I checked my balance today and noticed there's a button where I can convert it to a Roth IRA. Since my contributions are coming out of my pocket post-income tax would it be better to convert to a Roth or leave it alone?

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DeluxeXL t1_j2eqmuz wrote on December 31, 2022 at 6:45 PM

If you cannot deduct the traditional IRA contribution due to your income and having a 401k, you should then consider the following two things:

Can you make Roth IRA contributions directly? Read about the income limit. If yes, recharacterize the 2022 traditional IRA contribution as Roth IRA contributions.
If #1 is a "no", then read about Backdoor Roth

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Citryphus t1_j2eq4ho wrote on December 31, 2022 at 6:42 PM

Are you not able to deduct your traditional IRA contributions on your 1040?

1hotjava t1_j2eqd9n wrote on December 31, 2022 at 6:43 PM

>Since my contributions are coming out of my pocket post-income tax

Are you deducting the IRA contributions on your income taxes each year?

AptQ258 OP t1_j2eriqs wrote on December 31, 2022 at 6:52 PM

Yes. I should qualify that as "coming out of my pocket take home pay." Taxes are withheld from my paycheck.

1hotjava t1_j2esxmn wrote on December 31, 2022 at 7:01 PM

But if you take the deduction on your income tax then it’s pre-tax dollars going into the IRA. In that case a conversion would all be taxable as income. Generally it’s not very efficient to convert to Roth because of the initial tax drag.

[deleted] t1_j2etpv7 wrote on December 31, 2022 at 7:07 PM

[deleted]

2_kids_no_money t1_j2fgrr5 wrote on December 31, 2022 at 9:53 PM

What’s your income and how much is in it?