Vanguard Backdoor Roth Step-by-Step Information [Screenshots]

Yearly or two, Vanguard adjustments its course of barely. In case you perceive the Backdoor Roth IRA, these little tweaks are not any massive deal. If it is your first time, they are often complicated. We periodically replace this publish, however when you’re doing this course of someday after this publish will get revealed once more, do not be shocked if it appears somewhat completely different from what you see right here. The newest replace makes use of screenshots from 2025.

This is all you’ll want to know to do a Backdoor Roth IRA with Vanguard.

Step 1: Contribute to Vanguard Conventional IRA

First, go to your conventional IRA account and click on on Transact. That offers you a drop-down menu, the place one of many selections is “Contribute to IRA.” Click on on that.

This may carry you to this web page.

It exhibits you the contributions made thus far for the years which can be nonetheless eligible for contributions. You’ll be able to see we beforehand maxed out the 2024 contribution, so all that’s left is a 2025 contribution. And see additionally that it’s simply going into money—the Federal Cash Market (Settlement fund)—so it does not have a loss in between the contribution and conversion step. Then, you’ll want to select the place the cash is coming from.

You may have a number of selections, together with utilizing any of the banks you have linked to this account, sending Vanguard a examine, exchanging from one other fund, or utilizing your settlement fund. In case you can, use the settlement fund in your brokerage account. It should lower the period of time for cash to “settle” and can help you full the Backdoor Roth IRA course of just a few days sooner. This can be a greater deal at Constancy than at Vanguard, however, after I used cash from my checking account to make the IRA contribution at Vanguard, I needed to wait as much as per week between contribution and conversion.

You may possible find yourself at this display subsequent. On this case, we took the cash out of the Federal Cash Market (Settlement fund) in our brokerage account, so when you’re doing the utmost quantity of $7,000 [2025 — visit our annual numbers page to get the most up-to-date figures], sort in that quantity and hit Proceed.

That each one appears OK, so hit Proceed.

Hit Settle for right here, and it brings you to the evaluation and submit web page.

Verify it over and hit Submit. That’ll take you to the affirmation web page.

Congratulations! You have made a contribution to a conventional IRA and left the cash sitting in money. At Vanguard, you are finished for the day. In case you used your settlement fund, come again tomorrow (or the subsequent enterprise day). In case you used your checking account, come again in just a few days after the contribution “settles” to do step 2.

Step 2: Convert Vanguard Conventional IRA to Roth IRA

On Day 2, you go to your conventional IRA and hit the “Convert to Roth IRA” button.

There are different methods you may get to the identical place, like going to the “trade funds” hyperlink (on the purchase and promote menu). However this manner appears best. You may then come to a display that appears like this.

This web page is only a warning; you need not fear. Hit the “Begin my Roth conversion” button, and you will go to the subsequent web page.

There’s lots of great things on this web page, however you’ll be able to ignore all of it when you’re a typical white coat investor doing all your annual Backdoor Roth IRA. Hit Proceed.

I really like this web page. It does not ask you if you wish to withhold taxes (you do not); it simply has you agree that you just will not. Excellent. (You are not going to owe taxes on the conversion of a non-deductible contribution anyway, and if Vanguard did that, it will simply imply you ended up with much less in your Roth IRA and have to attend to your tax refund to get the cash again.) Hit “I agree” after which Proceed, and go to the subsequent web page.

I like this web page, too. It is Vanguard’s new look, and it has a pleasant bar on the prime to trace your progress by way of the Roth conversion. Hit Proceed and transfer on to the subsequent web page. Notice that the web page could provide you with a warning that appears like this:

That simply means the cash in your conventional IRA hasn’t settled but. Come again in a day or three when it has. Whether it is settled, the subsequent web page will appear to be this.

In case you’re doing all your Backdoor Roth IRA course of proper, you simply convert the complete account as a result of all that’s in there’s this 12 months’s IRA contribution. Don’t fret concerning the tax warning. Bear in mind, some Roth conversions are taxable however not within the Backdoor Roth IRA course of. Hit Proceed and go to the subsequent web page.

This web page appears somewhat odd while you solely have one Roth IRA, however I suppose it’s a necessity. Hit Proceed.

That is one other odd web page, however I suppose it is an IRS requirement. I do not want a discover saying Vanguard is just not going to withhold taxes that are not owed anyway, however you may get one if you’d like. Then hit Proceed.

That is your evaluation web page to double-check earlier than submitting the order. The astute observer will discover this way says the conversion quantity is $8,000. That is as a result of I used screenshots from each Katie’s and my Roth conversion this 12 months. One among us turned 50 this 12 months, and they also’re eligible for a $1,000 catch-up contribution for the primary time. Your conversion quantity ought to be about the identical as your contribution quantity. When you have just a few {dollars} additional in there from earnings whereas sitting within the conventional IRA, convert these, too. You may owe tax on these few {dollars}, however I am positive you’ll be able to afford it.

That is simply the affirmation web page. Go forward and hit Exit. Notice that it says you could have to attend two days for the conversion to be full. That wasn’t the case for me. The cash was instantly obtainable to take a position, so I did.

Do not forget to take a position your Roth IRA cash, or it’s going to simply sit in money.

Extra data right here:

Pennies and the Backdoor Roth IRA

Easy methods to FIX Backdoor Roth IRA Screwups

Step 3: Select Vanguard Roth IRA Investments

Return to the web page that lists all of your accounts and click on on the Roth IRA account.

Click on on Transact after which “Purchase Vanguard mutual fund” (or no matter you need to put money into), and you will go to a web page the place you are able to do so. Mine seemed like this.

This whole Roth IRA is already invested within the Vanguard Actual Property Index Fund, so this new contribution will go there as nicely. I hit Purchase, and it takes me to this web page.

I put in $8,000 ($7,000 when doing Katie’s Roth IRA), hit “Proceed order,” and transfer on to the subsequent web page.

As soon as extra, you must hit “Preview order” and transfer on to the subsequent web page. I like the brand new part right here the place Vanguard updates you on the place you stand for this 12 months’s and final 12 months’s IRA contributions.

This is the affirmation web page to your commerce/order.

That is it, you are finished till subsequent 12 months. Do not forget to do a spousal Backdoor Roth IRA if obtainable.

The method will probably be barely completely different at Constancy, Schwab, and different IRA custodians, however the fundamental steps will stay the identical.

When you have a query concerning the Backdoor Roth IRA and never Vanguard particularly, you need to FIRST learn this very in-depth Backdoor Roth IRA Tutorial earlier than asking your query within the feedback beneath. I promise you there’s a 99% likelihood your query is answered there.

What do you suppose? Do you do your Backdoor Roth IRA(s) at Vanguard every year? What issues have you ever run into? Any questions? 

[This updated post was originally published in 2021.]