Converting to ROTH IRA

So I did some re-organization this week. One of my accounts was a traditional IRA funded with post-tax money (the so called - Non-Deductible-IRA). Since I have already paid taxes on it, a conversion to a ROTH IRA does not result in any additional tax liability. There is absolutely no downside to it - so I went ahead and converted the balance into a ROTH IRA. The transaction was without complications since I did not have ANY pre-tax money in ANY IRA.

I am still keeping the traditional IRA around since the cash back from my Fidelity Credit Cards goes to that IRA account. As the value in that account accumulates, I will continue to push them to the ROTH IRA.

Essentially, this is a backdoor option for ANYONE to contribute to a ROTH IRA every year. Even if you are over the income limit to contribute to a ROTH IRA, just contribute to a non-deductible traditional IRA and then convert that to a ROTH IRA - the conversion is trouble free since there is no income limit on conversion - and if you do not have any other IRA with pre-tax money then the transaction does not lead to additional tax liability. Congress will, someday, put back the income limit of ROTH conversions and then this route will be closed - but until then - enjoy (and take advantage of) the ability to contribute to ROTH IRA every year without income limits.

Doing the same for my spouse is turning to be a little bit complicated since in that case we do have some pre-tax money in a rollover IRA (because of a 401-K to IRA rollover) and some post-tax money in a traditional IRA. It is my understanding that a conversion from the traditional non-deductible IRA to a ROTH IRA will attract some new tax liability since not 100% of all IRA assets are post-tax. I am going to hold off on doing that conversion.

Sometimes you don't need art, just a chuckle is just as good: