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Comment by tracer4201 | Hacker News Reader

I'm disqualified from contributing to a Roth IRA. My uninformed speculation on why Roth IRA income caps and max annual contribution limits exist is that it's the sake of tax revenue.

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In practical terms, you’re not. Contribute to a traditional IRA. Roll it over immediately into a Roth IRA. You can do this regardless of how large your income is.

Note: unless you have existing savings in a traditional IRA.

Yeah, this is an important caveat. If you have existing IRA funds, roll them into a 401(k) first.

Wait before rolling it over, probably at least 30 days. If you do it immediately it is considered a single transaction and illegal. If audited they’ll make you reclassify it and pay penalties.

Any reference or citation for that? I have never heard that advice and a quick googling doesn't turn anything up either. I've generally heard the opposite advice (convert the next day to minimize exposure to [undesired] gains/losses while a traditional IRA).

The google term you want is “structured transaction.” Any sequence of legal transactions clearly designed to do an illegal thing when done directly is to be treated the same as if it had been done as a single step.

The point of waiting e.g. 30 days is EXACTLY that it exposes you to gains/losses and you can rightly say the two actions are no longer connected.

Interesting, I've always been informed that waiting one day is sufficient. But, didn't the backdoor roth get closed in the recent tax change?

It didn’t, and doing an immediate rollover is not considered structuring since rolling over IRA contributions into a Roth is explicitly legal.

You are confused as to the definition of a “structured transaction”. There is no issue with performing an immediate rollover. Rolling over IRA contributions into a Roth is not only legal, it is explicitly endorsed by the IRS.

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