Fidelity Backdoor Roth IRA Steps

• Fidelity Investments announced a new initiative on Aug. 28, 2021, that will make it easier for investors to open and fund a Roth IRA.
• The Massachusetts-based financial services company will waive the $100 minimum funding requirement normally required for opening a Roth IRA account.
• Fidelity will also waive the annual account limit of $5,500, allowing investors to contribute up to $9,000 per year, all in.

Fidelity Investments announced a new initiative on Aug. 28, 2021, that will make it easier for investors to open and fund a Roth IRA. The Massachusetts-based financial services company will waive the $100 minimum funding requirement normally required for opening a Roth IRA account. Fidelity will also waive the annual account limit of $5,500, allowing investors to contribute up to $9,000 per year, all in.

What Is a Fidelity Backdoor Roth IRA?

A backdoor Roth IRA allows you to contribute after-tax dollars to a Roth IRA account, which grows tax-deferred. You are required to pay taxes on the funds when you withdraw them, but you can take tax-free distributions once you reach age 59 1⁄2.

You have two ways to open a backdoor Roth IRA:
1. Convert an existing nondeductible IRA into a Roth IRA.
2. Contribute nondeductible after-tax income to a traditional IRA and then convert it to a Roth IRA.

Fidelity only allows you to roll your IRAs over to their platform or to American Funds. The rollover must be a direct transfer, not a check or cash, and must be for the full amount.

Fidelity Brokerage Account

If you already have a Fidelity account, you can open a Roth IRA with as little as $500.
Roth IRA
To fund your Fidelity Backdoor Roth IRA, you will first need to fund your new Fidelity account. If you already use Fidelity, you shouldn't have a problem. If not, you will need to open a new Fidelity account. Once your account is set up, then you will have access to open your Roth IRA.
Fidelity Account

How Much Can I Contribute to a Fidelity Backdoor Roth IRA?

Fidelity Backdoor Roth IRAs allow you to contribute up to $7,000 in 2020 for taxpayers who are single or married filing separately and up to $14,000 for taxpayers who are married filing jointly.

Who Is Eligible to Contribute to a Fidelity Backdoor Roth IRA?
You are eligible to contribute to a Fidelity Backdoor Roth IRA if you are under age 70 1⁄2, and you are not an active participant in a Fidelity 401(k), 403(b), 457, or TSP plan.

How Much Can I Withdraw From a Fidelity Backdoor Roth IRA?
You can withdraw the contributions you initially make into your Fidelity Backdoor Roth IRA at any time, but you cannot withdraw any earnings until you reach age 59 1⁄2.

Can I Transfer Money From My Current IRA to a Fidelity Backdoor Roth IRA?
Yes. You can transfer funds from your current IRA custodian to a Fidelity Backdoor Roth IRA.

What Are the Benefits of a Fidelity Backdoor Roth IRA?

The Fidelity Backdoor Roth IRA offers the following benefits:

1. A rollover from any eligible retirement account (e.g., a 401(k), traditional IRA, Roth IRA, etc.)

2. You can contribute $5,500 per year ($6,500 if you are 50 or older).

3. You can make after-tax contributions.

4. You can contribute more than $5,500 for the 2018 tax year if you are over 50 years old.

5. You can withdraw contributions at any time.

6. You can withdraw earnings without taxes and penalties.

7. You can contribute after-tax dollars.

8. Fidelity Backdoor Roth IRA is tax-deferred.

What Are the Limitations of the Fidelity Backdoor Roth IRA?
The Fidelity Backdoor Roth IRA has limitations:

1. You cannot contribute to a Fidelity Backdoor Roth IRA if your income is over $135,000 (or $199,000 for married couples).

2. You cannot contribute to a Fidelity Backdoor Roth IRA if your income is over $199,000 (or $135,000 for married couples) and your modified adjusted gross income is over $120,000 (or $189,000 for married couples).

3. You cannot contribute to a Fidelity Backdoor Roth IRA if you are covered by an employer retirement plan or an IRA.