WCI #316: Roth Contributions and Conversions

This is the White Coat Investor Podcast where we help those who wear the white coat get a fair shake on Wall Street. We've been helping doctors and other high income professionals stop doing dumb things with their money since 2011.

This is White Coat Investor podcast number 316. If you are finding our podcast informative and helpful, check out our website. Since 2011, we've been working hard to provide valuable personal finance and investing information. Through thousands of blog posts written by an array of authors, you can find information on how to manage your student loans, fix and avoid common financial mistakes, understand your retirement accounts, optimize your investments, find professional help at a fair price, get started investing in real estate and so much more, all at no cost to you. You can find out more about the courses we offer, the conferences we put on, the newsletters we provide, and interact with other WCI readers through our online forum. Head on over to whitecoatinvestor.com to start learning today. You can do this and the White Coat Investor can help. All right, if you're watching this on YouTube, I'm wearing a tie. Yeah, I'm all dressed up. I'm actually recording this on about tax day April 17th. I know it's not going to run for a while, but I had a presentation with University of South Florida students today, so I thought I'd put on a tie for them. I've just left it on while recording podcasts. So if you're wondering why I'm dressed up, that's the reason why. All right, Roth. Who is Roth anyway? Roth is William. He was a Senator and in 1997 somehow managed to get his name on a piece of legislation that introduced the Roth ira. And so it's not an acronym, it's somebody's name. R O T H. That's where it comes from. Subsequently, a few years later, I think it was about 10 years later, you started being able to have Roth 401ks and 403s and all Roth means is tax free, meaning you put after tax money, money that's already been taxed into the account and when it comes out, it doesn't get taxed again, grows tax protected when it comes out totally tax free, no matter what you spend it on. Now, like any other retirement account, it usually has rules. It's supposed to be for retirement, so if you take it out too early, you might have to pay a 10% penalty on it, unless you meet one of the plethora of exceptions there are to that penalty, including early retirement, typically for 401s and 403s, that's $55,000 and separated from the employer. For IRAs, that's 59.5. But like I said, there's a long list of exceptions. Usually early retirement or concern you might need the money early is not a good reason not to save inside a retirement account when you otherwise can. For 20, 23, you can put in $6,500 into a Roth IRA. Most of us are having to do it indirectly via the backdoor Roth IRA process. You can do that for your spouse as well. They probably also have to do it through the backdoor Roth IRA process. If you're 50 plus 50 or better, maybe that's the way to say it. It's $7,500. You can also totally separate limit. You can put $22,500 into your Roth 401 or your Roth 403B. If you're 50 plus 50 or better, that's $30,000. Okay? And in fact, the total amount that can go into that account is also a little bit higher when you're 50 plus because that catch up contribution is in addition to the 415c limit, aka the $66,000 per unrelated employer retirement plan limit. If you're lucky enough to have a 457, there might also be a Roth option on that again, another $22,500 that you can put into that. Our Secure Act 2.0 legislation has brought up all kinds of other Roth possibilities that are going to be coming down the pike. This includes Roth Sep IRAs, Roth Simple IRAs, and even Roth matching contributions for employers. Now most of us are still trying to figure that out. If you're an employer or you're a retirement plan provider, you know, you're still trying to figure this out and I don't even know if it's going to be done by the end of the year. I kind of thought we'd start seeing it by now, but I haven't seen anybody offering it yet. But it's supposed to be legal starting this year anyway. Lots of cool things you can do with Roth. One of the most difficult decisions is when you have the option when where you can do tax deferred contributions or you can do Roth contributions. The rule of thumb is that you do tax deferred contributions during your peak earnings years and Roth contributions in other years, like when you're a resident or a fellow or that half a year after you come out of training, or when you go on maternity leave, or when you cut back later in your career and now you're working part time those sorts of years you do Roth. But there are lots of exceptions to this rule, one of which is being a super saver. If you're saving so much money that you're going to be in a higher tax bracket in retirement, you should be doing Roth savings now. Another exception is people that are expecting a big pension. You know, like a military member maybe. You know, you're in this low tax bracket all the time you're in the military, and then when you come out you have this other pension and you end up in a higher tax bracket. So Roth contributions are right for almost all military members as well. If you just expect a whole bunch of taxable income in retirement, maybe from a real estate empire you're building or something, they can also be a great option during your peak earnings years, even though you're paying a lot of tax on getting that money in. But everybody else, the rule of thumb is peak earnings years are for tax deferred contributions. Okay, what should we talk about? Let's do a correction. I screw up every now and then. It's true. I don't know everything about finance and I make mistakes. This one's more of a clarification than a correction, though. Reader and this is Matt writes in and I appreciate this. I always appreciate getting corrected it's harder to correct podcasts than it is blog posts. I can correct blog posts before most of you read them. Podcasts a little harder because the correction comes out a few weeks later. Beth says, Love the podcast. Thanks for all you do. I'm writing concerning a correction I believe needs to be made to your recently aired podcast episode on Taxes. In it, a caller asks about correcting a previously filed tax return. Late arriving 1099. In response, you encourage the caller to file an amended tax return. My understanding is that a very similar but slightly different procedure called the superseding return is necessary. The superseding return occurs when a correction needs to be made prior to the filing deadline, while an amended return occurs after the filing deadline. Practically speaking, there's very little difference between these two options. If using software, most programs handle it automatically or have a checkbox that can be used if filing by hand writing superseding return instead of amended return is sufficient. I'm not sure that anybody at the IRS actually cares about this difference, but at least in theory, a superseding return has some additional protections and options relative to an amended return. So super interesting there and links to a good blog post about it. We'll include that in the show Notes if you want to check it out. But yeah, if you are doing it before the tax deadline, it's a superseding return, not an amended return. All right, let's take a question about Roth Sep Iras from Mark on the speak pipe.

Hello Dr. Dali and friends, longtime listener, second time caller. I have a Roth SEP IRA conversion question. As per The Secure Act 2.0 and your recent White Coat investor email summary of the actual in 2023 SEP IRA in plan conversions will seemingly be available. Although I am intending to start an office 401k as I have employees for 2023, I have no longer contributed to the SEP IRA for 2023 at all. However, the $150,000 in this SEP IRA I would like to convert either into an in plan Roth IRA or or into the group 401k that is being started for this year so that I can finally contribute to the backdoor Roth IRA as well. Of course, I would prefer to convert to the in plan Roth IRA as the group 401 has a 0.15% AUM. Are there other things I should be considering in this decision? Thank you very much.

All right, good question. Well, 0.15 is not like some huge AUM fee. I wouldn't let that sway your decision so much. The real decision here is are you going to roll this in to the tax deferred part of your 401 and avoid taxation on it, or are you going to do a Roth conversion? Because there's a big tax cost. If you convert $150,000, you're probably paying $50,000 in taxes on that Roth conversion. So you've got to make sure that is really the right move for you. I think that's far more important than that 0.15% AUM fee. Now, if that's 1.5% AUM, maybe I feel a little bit differently. But I think the big question here is when should you be paying your taxes? And that's hard to sort out. If you're in peak earnings years, the rule of thumb is mostly not to do a Roth conversion at this time. And I just roll it into your 401 and that will also allow you to do the backdoor Roth IRA process each year. If you really want to do the Roth conversion, you can do that in a lot of ways. You can take that money out of your SEP IRA into a Roth ira. That would be a conversion, be a transfer and a conversion. Or you could do it into this new plan. Or you know, if, if your Existing SEP IRA allows it. You could do an in plan conversion, but I wouldn't hold my breath on the plan allowing that anytime soon. Everybody's still trying to figure out the rules on those, so hope that helps. All right, next question from Jonathan.

Hi, dear Dolly. My name is Jonathan and I'm a current Mercy Medicine resident and my wife is a current general surgery resident. And my question revolves around the RO HRA contribution. My wife and I are both on public service loan forgiveness and also on the payee paye repayment plan for our student loans. I have about $400,000 in student loans. My wife has about 300,000. So we're having to file our taxes as married filing separately to do this payment program. I noticed on the Roth IRA contribution limit the Magi 0 to $10,000 if filing MFS. Does this mean that while we're filing MFS, my wife and I cannot have a Roth IRA account through Vanguard? I couldn't find any information on this IRS website besides the contribution limit for MFS filers. Does this mean that we can't have a Roth IRA account until we finish paying off our student loans and are able to file as married filing jointly? It's somewhat confusing. I don't understand that as both residents, her income is about 58,000. Mine income is 58,000 that we would somehow be ineligible for having a Roth IRA account at this time. Thank you for all your help you do on giving physicians a fair shake.

All right, Jonathan, I really appreciate you calling. I really appreciate what you do. Being a resident is not easy, Em. Residency is not easy. I know a general surgery residency is not easy. So thanks to you guys for what you're doing. You guys are like poster children for studentloanadvice.com this is this company we started to help people with their student loans. But you've got two docs thinking about filing MFs, trying to maximize their PSLF, both with differing amounts of student loans. I mean, you're perfect to actually hire somebody to help you run the numbers if you do not feel like you have a handle on this. This is totally worth the, whatever it is, five or six hundred bucks to pay, you know, a student loan specialist@studentloanadvice.com to really make sure you're doing your student loans right. The difference could be tens of thousands of dollars in additional forgiveness for you guys. So consider that they're actually doing a bonus this month. It ends on May 31st, I think. This podcast drops on the 25th, so you got six days if you schedule a consult, and this is not just for you, this is for anybody, you schedule a consult with studentloanadvice.com During May, you get a free signed copy of the White Coat Investors Financial Boot Camp. And that's me signing it. I'll sign it, and we'll send it to you. So consider doing that. But here's the deal. Here's how it works. I know it doesn't seem fair. You guys don't make that much money, and all of a sudden you got to do backdoor Roth IRAs. That's crazy. Yes, that's the way it is. If you are filing married filing separately, you have to do your Roth IRA contribution. Indirectly, you have to do it through the backdoor Roth IRA process. If you don't do that, you're going to be recharacterizing that IRA contribution step. Sorry, that's just the way it is. I don't make the rules, but basically you phase out between like zero and $10,000 of income when you're filing married filing separately. And we could speculate about all the reasons why that is, but it doesn't really matter. That's the way the rule is. So if you want to do Roth IRAs, get used to doing the backdoor Roth IRA like the rest of us. Don't worry, you'll have to do it soon anyway. That's just the way the system is set up. Hope that's helpful to you. Hey, speaking of help, we could use your help. Not these two docs. They can't help. They're residents. You have to be an attending or retiree to help with this. And that's being a judge for the White Coat Investor Scholarship. So you can apply for that at scholarship@whitecoatinvestor.com, just put volunteer judge in the title. We'd love to have you. It's unpaid. Yes, but it's not that much work. You got to read like 10 essays that are 1,000 words apiece and help us choose which ones I'm going to give $7,000 or so to. Okay. Also. Hey, man, I can't believe it's that time again. It is time to get speakers for WC Icon 24. I can't believe it. WC Icon 24 is next February in Orlando. It's going to be awesome. It's going to be so fun. You can come out weekend before, go to Disney, the weekend after, go to Disney. It runs Monday through Thursday this year, but that's so you can make a trip of it. Bring somebody with you and have a great time in Florida. Great time to be in Florida. But anyway, if you don't want to pay to come, you want to come for free. You want me to pay you to come be a speaker? We are accepting applications from May 15 through June 15. That's it. After June 15, we're kind of done the speakers, and we got to figure out who they are and put it all together. And it takes months to do that, so that's why we've got to do it so early. You can apply wcievents.com speaker application. And we like to bring back our people's favorite speakers. Yes, we have some repeat speakers, but we also try to bring in new people every year, and we'd love for you to be one of those. Here's the secret, though. Here's the secret on how to be a speaker at wcicon. Apply for more than one talk, because we may not need the talk you want to give. We may need something else. So if you are capable, if you are knowledgeable enough to give multiple talks, please apply for multiple talks. You're far more likely to be selected as a speaker. All right, enough promotions crap. Let's answer your question. This podcast supposed to be about you. All right. Moving funds to Vanguard. All right, what's this one all about on the Speak Bite? My wife and I have Roth IRAs that were set up long ago by a friend with Thrivent. My wife also has a 403 from an old employer which is less than $18,000. A friend has left Thrivent, and we are now interested in moving that money elsewhere. I have been following you for five years and am comfortable managing our finances. We have a brokerage account and individual 401k with Vanguard. I'm therefore interested in moving the money to Vanguard. Is there any reason to consider another company? My assumption is that we will need to create traditional and Roth IRA accounts for both myself and my spouse in order to do backdoor Roth conversions. Since our income is over the limit, are there other things that we should consider? You have changed our lives tremendously, and for that, we are very thankful. All right. Should you use Vanguard? Well, I got a bunch of my money at Vanguard, so I'm going to go with yes. I think Vanguard is a good company. They have had some complaints about customer service. Vanguard has grown very quickly, and that has required them to hire a lot of customer service agents, people to pick up the phone. And Jack Bogle, the founder, he was a little bit like Sam Walton in that. Sam Walton's of Walmart fames. I don't know what his quote was, but something like low prices are the priority or something like that. Low prices forever. Low prices always. Maybe that's the logo. It's a little bit like that at Vanguard. Okay. They want to keep your price down, and that sometimes means you don't get quite as good customer service as you do at Fidelity or Schwab. In my experience, it's always been good enough. And in fact, as I have built assets there and moved up into kind of wealthier categories, I found I get really good service now. So I think it's fine to use Vanguard. All my kids Roth IRAs are at Vanguard. All my kids Utmas are Vanguard. Katie and I have our Roth IRAs there. We had a solo 401k there until we had employed employees. Now it's at Fidelity. Just because it worked out better for people putting our 401k together. They don't have HSAs there. Our HSA is at Fidelity. But, you know, our taxable account with our trust and the one without our trust, that's all a Vanguard. So, yeah, I think Vanguard's fine. You can open an account there. One thing you need to watch out for, just from what you mentioned, I think you said your wife had a 401k or a 403b or something with $18,000 in there. Remember, if you just roll that into a traditional IRA at Vanguard, that's going to cause you pro rata problems with your backdoor Roth IRA process. So you got to figure out what you're going to do with that $18,000, whether you roll it into another retirement account for her or you convert it to a Roth IRA. I think for $18,000, I'd probably convert it and just pay the $6,000 tax. But that means you got to have $6,000 sitting around to do that with. But beware of that. Otherwise, it's fine. Vuard's good. You know, if you really don't like them, you can check out Schwab or Fidelity. Those are other good options. I would not feel bad at all about having all of my assets at either of those places. But I am still a Vanguard fan, and I honestly think the customer service is getting better. But that might just be a reflection of the people that are helping me now that I have a little bit more assets there. Okay, next question is from Monica.

Hello, Jim, and the WCI team, and thank you for all you do. I'm an anesthesiologist working for a large hospital system in a community hospital outside of New York City, and I have a question about Roth contributions in a 401k versus backdoor Roths. Prior to working for this large hospital system, I was employed by a small private practice that was subsequently acquired. They closed their 401k and it was rolled into an IRA and it has about $30,000 in it. My new employer both allows me to roll this IRA into my 401k and offers Roth contributions within my 401k. The retirement advisor for our service line says she recommends making 50 to 100% of my contributions as Roth in my 401k and then putting 6,000 a year into my traditional IRA as she thinks the backdoor Roth is going to be phased out and tax rates are likely to increase in the future. My accountant, who's also a tax lawyer, advises against this because it will increase my taxable income, but did say there's no particular threshold we would breach if I maxed out my 401k with Roth contributions. My husband's also a physician and we're both relatively early in our careers, him about six years out and me about two. Do you think the backdoor Roth is going away? Is there any advantage to keeping this IRA or should I roll it into my 401k? Are there any other factors I should consider when I'm thinking about making Roth contributions to my 401k?

Thank you, Monica. You're really well spoken. You sure you don't want to come speak at WCICON24? Directions were earlier in the podcast, but you should check that out. You sound like you're a really good public speaker. The answer to your question is that I don't know what the right answer is for you. Whether you should do Roth contributions or tax deferred contributions is a very difficult question. There are a lot of factors that go into it, some of which are unknown, some of which are unknowable, such as future tax rates. But the rule of thumb still applies in your peak earnings years. Especially you're a 2 dot couple in your peak earnings years. Tax deferred contributions are almost always the answer. Unless you guys are super savers and you're just saving like crazy. You're gonna have so much wealth in retirement, you're gonna be in the top tax bracket the rest of your life. That's probably the right answer for you. That would align with your tax advisor. It wouldn't align with the, you know, advisor attached to that plan. But, you know, this is not something where the answer is the same for Everybody, because tax rates are going up, everybody should do Roth. That is not the answer. That's wrong. That is not the case. Even if tax rates went up 3%, 4%, or 5%, each bracket went up that much higher, which would be a heck of a tax raise, it still might be the right answer for you to have done tax deferred contributions now at 32%, because later you might be taking them out at 26% or something, even with higher tax rates. And so it's not as simple as that person associated with the 401 makes it. Would I keep money in an IRA? No, you can't keep money in an IRA and do backdoor Roth IRAs. It's got to go somewhere. You either need to convert it to a Roth IRA or you need to roll it into a 401 or 403. So keeping it sitting around in an IRA is not a great idea. But as far as the mix of what to do for your Roth versus tax deferred, 401 or 403 contributions, that's a much harder question to answer. And if you're just not sure, split the difference. Put half in each. I've got one of my partners. That's what he's been doing his whole career. He's like, I just don't know. Okay, well, that approach will work. One of those will be wrong. I can't tell you which one, though. But I've done it wrong in the past. I made tax deferred contributions when I should have been making Roth contributions just because I didn't know the future. I didn't know I was going to be a little wealthier than I thought. I didn't know that I was going to have a higher income than I thought. I should have done some Roth conversions maybe in the past when I didn't, and those sorts of things that come up. But it's okay if you end up choosing Roth. Let's say you do tax deferred contributions and you should have done Roth. Well, the circumstances that will cause that to be wrong are such that they're total first world problems. You're like, oh, I have so much money, I have to pay so much in taxes. Right. That's the sort of thing that happens that makes it end up being wrong. Now, going the opposite way, if you do a Roth conversion or Roth contribution, it turns out you should have done tax deferred. That might cost you a little more, even if you don't have as much money as you thought you were going to have. But for the most part, that's not what people are worried about. So do the best you can trying to figure it out. I've got a great blog post on it. It's called Roth versus tax deferred 401 contributions or something like that. Let's see Roth versus put it in my computer here. Roth versus traditional 401k contributions. It goes through all the factors that affect it. You can think about which ones affect you and that'll help you make a decision. But I hope that's helpful to you. I wish it was as cut and dry as just tell you always do Roth as some radio personalities and obviously your advisor in that plan, they try to dumb it down to people. But it's not that simple. Einstein said make things as simple as possible but not simpler. That's making it simpler. So this is a hard question. You don't always get it right. That's a good problem to have. All right, Quote of the day today comes from our friend Michelle Singletary. She's been a speaker at wcicon before. The first one of these we had in Arizona. She was one of the keynote speakers. She said to increase my wealth I had to decrease my wants. A lot of truth to that. Okay, next question is Jason on the speak pipe.

Hi Jim, thank you so much for all that you folks do. My question is when are Roth conversion taxes calculated and assessed? I lived in a state with no income tax and had a deferred compensation which was all pre tax contributions totaling $15,000. I then moved to another state where I currently reside and initiated a rollover to a Roth IRA with Vanguard and the money is currently sitting in a rollover IRA brokerage account at Vanguard and I've not done anything with it. The state I currently live in has state income tax. However, in two months I am returning to that initial state that has no state income tax at all and I will be permanently living there. I'm trying to avoid a tax bomb and having to pay state income tax and federal income tax by rolling over the money right now. So it's sitting there in that rollover IRA account. What I'm trying to figure out is if I roll the money over when I return there in two months permanently, if the state will still want income tax if I do it this year or do I need to wait until next year and then roll the money over. So it's really kind of a tax question and a state tax question and how to avoid that.

This is a great question. Here's the truth of the matter. I Don't think anybody's looking that close. State tax commissions are overworked and underpaid and under regulated and aren't watching all that closely. I think you can probably do this in a way that is advantageous to you without anybody ever noticing. I guess the technical answer is wherever you live and file taxes, when you do the conversion is where you need to pay taxes on that. So I would probably wait until you are not living in that state with the state income tax before doing the Roth conversion. Sounds like you only have to wait a couple of months, no big deal. So I'd probably do that now. If you are filing as a resident of that state, well, I guess you won't be filing as a resident of that state with no tax income. So all you're going to be filing, it sounds like to me, is a non resident return in one state. At least that's what you're hoping for, right? And you're trying to say all your other income that you don't have to attribute to that state is in the state tax free state, Texas or Nevada or Alaska or whatever it is. That's how I would try to set up my taxes. So I paid as little in tax as possible. But if I was worried about an audit and somebody going, hey, this Roth convert, you know, estate tax audit, which is even more rare than a federal tax audit, but them saying, oh, that's, you know, that's Illinois source income, you got to pay taxes on that. Well, you can say the date was this day, that day I was living in this state. Here's the receipts that show it. That's not Illinois source income, it's Nevada source income. And so I think that's about as far as I'd take it. I'm not getting the impression you're going to have to file as a resident in any state, but if that's not the case, then you may want to wait until next year when you're not filing as a resident there. That might make it a little more clear. But the timing of how you're filing in that state is not clear to me exactly. Okay, let's take a question from Greg.

Hi, Dr. Dali, thank you for all that you do. I had a question about the mega backdoor Roth ira. I have two jobs, one as a full time employee and the other as an independent contractor.

My employer does not have a 401 plan that allows for a mega backdoor Roth IRA. So I was interested in getting my.

Own 401k plan that allows for one.

The majority of my income is from my W2 employee income.

I make about 40k annually as a 1099 independent contractor. My question is, would I only be limited to put in my 40k per year contractor income into my own 401 plan or can I use some of my employee w2 income to max out the after tax contributions in my 401 plan plan to the $66,000 limit.

Thank you. No Greg, thank you for what you do. You're clearly working hard. You got these two incomes. Doctoring's tough. And all of you out there who had a rough day today, who had a patient die on you or some sort of terrible outcome or somebody yelled at you or whatever, nobody said thanks today for what you're doing. I know you have a difficult job and I appreciate it. Greg, Money is fungible, but it is not that fungible. You cannot take money you make at your W2 job and use it to justify contributions into your self employed retirement plan. Only the money you make as self employed income can count toward that. However, if you're making $40,000 there, if you just get a regular SEP IRA or the employer contribution in a regular Solo 401, you're only going to be able to put in about eight grand. But if you go to whitecoininvestor.com retirementaccounts and you go to one of those self directed solo 401k providers and they set you up a customized plan that will allow you to make mega backdoor Roth IRA contributions, you could put all $40,000 in there as a mega backdoor Roth IRA contribution. So it's up to you. You can have $8,000 in a tax deferred account and pay some taxes and put the rest in your taxable account or spend it, or you can stick it all into a Roth account and pay a little bit in fees to get that self directed solo 401k set up and to maintain it each year. Fees usually aren't too bad. It's usually just a few hundred dollars a year. Choice is really yours, but those are your options. Okay, question about the backdoor Roth ira. I wonder if we're getting close to the end of backdoor Roth IRA season starting about January 1st each year for about four months. I get 33 or four emails or comments on the blog asking me to help people with their Form 8606 each year. So it's you know, I do sympathize with all of you accountants out there that have your tax season because here at WCI we have backdoor Roth IRA season. It's got to the point where on the forums and the Facebook groups people are just like here's the link. Go figure it out. But I'm still trying to answer your questions when you come to me with them. So here's a backdoor Roth IRA question. Let's see if it's one I've never heard before.

I'm hoping hello Dr. Dali, thank you so much for all the things you do with your blog and podcast. They have been very helpful for me in my personal finance. I have a question about backdoor Roth IRA in 2022 filing taxes. I realized that I was contributing too much through normal Roth ira so I had to withdraw, push it to recharacterize to IRA after tax and then move it use the backdoor Roth IRA method. I was able to do that successfully at Vanguard and file taxes and everything is done in 23. I have received 1099 hours because of the withdrawal from Roth IRA and so now do what do I do with these distributions since it's all done in 22 tax filing? Do I need to declare that again because that will be double taxation. I'm not sure what to do with these 20221019 NRS from Vanguard. Thank you for your guidance on this.

Okay, well I don't have a lot of information, so I don't know if I can answer your question exactly, but let me talk for a bit and see if I can walk you through something that will be helpful to you. When you recharacterize a contribution, it is as though you made the original contribution to the other type of IRA account. If you're re characterizing from Roth to traditional ira, as far as the IRS is concerned, you always made that contribution to the traditional ira. I cannot tell when you did your last Roth conversion, but if you did a roth conversion in 2022 because this was a contribution for 2021 or whatever that you reported and you recharacterized in 2022 and then reconverted, well that is a taxable event for 2022. So that has to go on your 2022 Form 8606, the one you're filing in April of 2023. And so that's why you're getting 1099Rs because you did something in 2022 that's making Vanguard say oh, we should send this guy a 1099r now. You shouldn't get double tax though. You shouldn't even be single taxed. Right? The backdoor Roth IRA process. It should not incur any taxes, maybe on a couple of bucks that it gained between contribution and conversion. But the whole point of the process is to get money into a Roth IRA without having to pay any sort of taxes on it other than the taxes you paid when you earned it. So you shouldn't have had to pay taxes last year, you shouldn't have had to pay taxes this year. You just got to do the paperwork. You just got to put the paperwork into your TurboTax or onto your paper forms or give them to your tax preparer or whatever to get your taxes done. But basically you just got to put those 1,099 Rs in. And I'll bet I don't remember what the box is. 3B or whatever. 5B 1099R. Let me look at a 1099R here on mine. Sorry, it is 2B. There is a box labeled 2B. Taxable amount not determined. And most of the time when you get a 1099 from Vanguard about your backdoor Roth IRA, that box will be checked. So you just got to remember when you enter this stuff in to your TurboTax or whatever that the taxable amount not determined, they really mean that. And you got to put that in as not taxable, meaning that you have basis when you do the backdoor Roth IRA process. And so you should not be taxed on this, even though they sent you a 1099R. So when you're looking at your taxes, when you're looking at your form 8606, there shouldn't be an amount due on line 15C, there shouldn't be an amount Due on line 18. At least not an amount like $6,000. There's $3 there, that's fine. But if there's $6,000, you did something wrong. You need to go back and fix the form. Hope that's helpful. If you are finding our podcast informative and helpful, check out our website. Since 2011, we've been working hard to provide valuable personal finance and investing information. Through thousands of blog posts written by an array of authors, you can find information on how to manage your student loans, fix and avoid common financial mistakes, or understand your retirement accounts, optimize your investments, find professional help at a fair price, get started investing in real estate and so much more, all at no cost to you. You can find out more about the courses we offer, the conferences we put on, the newsletters we provide, and interact with other WCI readers through our online forum. Head on over to whitecoatinvestor.com to start learning today. You can do this and White Coat Investor can help. Don't forget to send in your application to speak@wcicon. That's wcievents.com speaker application. There will be a link in the show Notes. Don't forget about the deal at Student Loan advice. It ends May 31st. You get a free signed copy of Financial Boot Camp with any consult scheduled during May. And thanks for those of you leaving us reviews that helps others to find the podcast. We got a very kind one in from Brad Chandler Coaching. I guess he's some sort of a financial coach. Maybe he said. What a great podcast. I recently started listening to the White Coat Investor Podcast. It quickly became my go to source for financial Advice. The host, Dr. Jim Dali, is a real asset to the show. His expertise and insight are invaluable and he delivers the information in an easy to understand format. Topics covered are so varied and relevant that I never get bored listening. From investing advice to personal finance, Dr. Dali covers it all. He also interviews some amazing guests that bring even more value to the show. I highly recommend the White Coat Investor Podcast. Anyone looking for sound financial advice, no matter where they are in their journey. Five stars. Wow. That's great review. Thank you for that. All right, for the rest of you, keep your head up, your shoulders back. You've got this. We're here to help. See you next time on the White Coat Investor Podcast.

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