How to Execute a Backdoor Roth IRA at Fidelity

The basic steps for a backdoor Roth at Fidelity

A backdoor Roth at Fidelity works in four concrete steps: open a Traditional IRA if you don't have one, contribute money to it, wait a few days for the deposit to settle, then convert the balance to a Roth IRA. Fidelity handles the conversion on their platform without requiring you to move money between institutions. The entire process takes about a week from start to finish, though the IRS gives you until December 31 of the following year to complete the conversion.

The reason people use this method is that Fidelity (like most brokers) won't let you contribute directly to a Roth IRA if your income exceeds the IRS limit for that year. A backdoor Roth gets around that limit by using a Traditional IRA as an intermediary. The conversion itself has no income limit — anyone can convert a Traditional IRA to a Roth, regardless of how much they earn.

Before you start, check whether you have any existing Traditional, SEP, or straightforward IRAs at Fidelity or anywhere else. If you do, the pro-rata rule may affect your taxes. This is the one complication in an otherwise straightforward process, and it's worth understanding before you begin.

Key Takeaways

Open a Traditional IRA at Fidelity, deposit the money you want to convert, and wait for it to settle before proceeding to the conversion step.
Use Fidelity's conversion tool to move the Traditional IRA balance to your existing Roth IRA in the same account or to a new Roth IRA.
The pro-rata rule applies if you hold any other Traditional, SEP, or straightforward IRAs anywhere — even small balances in old accounts can create unexpected tax bills.
File Form 8606 with your tax return the year you convert to report the transaction to the IRS.
Fidelity charges no fee for the conversion itself, though you may pay fund expense ratios depending on what you invest the money in.

Opening a Traditional IRA at Fidelity

Log into your Fidelity account and go to the Accounts & Trade section. Click "Open an account" and select Traditional IRA. Fidelity will ask for your name, date of birth, address, and Social Security number — the same information they already have if you're an existing customer. The account opens when ready, and you can fund it the same day.

If you don't have a Fidelity account yet, you'll need to create one first. Go to Fidelity.com, click "Open an account," and choose Individual Brokerage Account to start. Once that's open, you can add a Traditional IRA to it. The whole process takes about 10 minutes.

You can fund the Traditional IRA by transferring money from your bank account, or by moving funds from another brokerage if you already have money elsewhere. Fidelity accepts ACH transfers (which take 1 to 3 business days) or wire transfers (which settle the same day). For a backdoor Roth, most people use ACH because the cost is zero.

Depositing money and waiting for settlement

Once your Traditional IRA is open, deposit the amount you plan to convert. For 2024, the IRS limit is $7,000 per person (or $8,000 if you're 50 or older). You can deposit more than this amount, but only the first $7,000 is treated as a contribution for that tax year — anything above it is treated as a non-deductible contribution, which has different tax consequences.

After you deposit the money, wait at least 2 to 3 business days for the transfer to settle in your Traditional IRA. You can see the status in your Fidelity account under the transaction history. Once the money shows as "settled" (not "pending"), you're ready to convert.

During this waiting period, you can invest the money in a money market fund, a stable value fund, or leave it in cash. Many people leave it in cash to avoid market risk during the brief holding period. Whatever you choose, the investment doesn't matter much because you're converting the whole balance in a few days anyway.

Converting the Traditional IRA to a Roth IRA at Fidelity

Log into Fidelity and go to your Traditional IRA account. Look for the "Convert to Roth" option, which Fidelity displays prominently in the account menu. Click it and select the amount you want to convert — usually the entire balance. Fidelity will show you an estimate of any taxes owed on the conversion (this is where the pro-rata rule matters, if it applies to you).

You can convert to an existing Roth IRA or create a new one as part of the conversion. Most people convert to an existing Roth if they already have one. If you don't have a Roth IRA yet, Fidelity will walk you through opening one during the conversion process. Either way, the money stays within Fidelity — you don't need to move it anywhere.

Review the conversion details, confirm the amount, and submit. Fidelity processes the conversion when ready, though it may take 1 to 2 business days for the money to appear in your Roth IRA. Once it's there, the conversion is complete.

Understanding the pro-rata rule and its tax impact

The pro-rata rule is an IRS rule that affects your taxes if you have any Traditional, SEP, or straightforward IRAs with a balance on December 31 of the year you convert. The rule treats all your IRAs as one pool for tax purposes, even if they're at different banks or brokerages. If any of that pool contains pre-tax money, a portion of your conversion is taxed as income.

Here's the math: if you have $10,000 in a Traditional IRA (pre-tax) and you convert $7,000 from another Traditional IRA, the IRS considers you to have $17,000 total. Of that $17,000, $10,000 is pre-tax, so 59% of your $7,000 conversion is taxed as ordinary income. You'd owe taxes on about $4,100 of the conversion.

To avoid this, some people roll old Traditional IRAs into a 401(k) plan at work before doing a backdoor Roth. This removes the old IRA balance from the pro-rata calculation. Check with your employer's plan administrator to see if they allow "reverse rollovers" of Traditional IRA money. Not all plans do, but many do.

If you have no other IRAs, the pro-rata rule doesn't explore and your entire conversion is tax-free (assuming the money in the Traditional IRA came from non-deductible contributions, which it should for a backdoor Roth).

Reporting the conversion on your tax return

In the year you convert, you must file Form 8606 with your tax return. This form tells the IRS about the conversion and calculates how much of it is taxable. If you use tax software like TurboTax or H&R Block, they'll prompt you to enter the conversion details, and the software will generate Form 8606 automatically.

Fidelity will send you a Form 1099-R in January of the following year, reporting the conversion amount. This form goes to the IRS as well, so they'll know about the conversion whether or not you report it. Filing Form 8606 ensures your tax return matches the 1099-R and prevents IRS notices later.

If you don't file Form 8606, the IRS may treat the entire conversion as taxable income, even if it should have been tax-free. This is one of the most common mistakes people make with backdoor Roths, so set a reminder to file the form with your tax return.

Costs and fees at Fidelity

Fidelity charges no fee to open a Traditional IRA, no fee to convert it to a Roth IRA, and no fee to hold either account. You won't see a line item for the conversion itself on your statement.

The only costs you may encounter are fund expense ratios if you invest the money in mutual funds or ETFs. These are ongoing annual fees charged by the fund company, not by Fidelity. For example, if you invest in Fidelity's FSKAX (a total stock market index fund), the expense ratio is 0.015% per year. If you hold the money in a money market fund or cash, there's no expense ratio.

Some brokerages charge fees for IRA transfers or conversions, but Fidelity does not. This is one reason Fidelity is popular for backdoor Roths.

Frequently Asked Questions

Can I do a backdoor Roth if I have a 401(k) at work?

Yes. A 401(k) is a separate account type and doesn't trigger the pro-rata rule. Only Traditional, SEP, and straightforward IRAs count toward the pro-rata calculation. If your only IRA is the new Traditional IRA you're converting, you're fine.

What if I already have money in a Traditional IRA from years ago?

The pro-rata rule will explore. You have three options: roll the old IRA into your 401(k) if your plan allows it, convert the old IRA to a Roth (and pay taxes on the pre-tax portion), or skip the backdoor Roth that year. Many people choose to roll the old IRA into their 401(k) before doing the backdoor Roth conversion.

How long do I have to wait between depositing and converting?

You need to wait for the deposit to settle, which is usually 2 to 3 business days. There's no IRS rule requiring a waiting period, but you can't convert money that hasn't settled yet. Fidelity won't let you convert until the transaction is complete.

Do I have to convert the entire Traditional IRA balance?

No. You can convert part of it and leave the rest in the Traditional IRA. However, if you do this and the pro-rata rule applies, the IRS calculates the tax on the entire IRA balance, not just the part you convert. Most people convert the whole balance to keep the math straightforward.

Can I undo a conversion if I change my mind?

Yes, through a process called a "recharacterization." You have until the tax filing important date (usually April 15 of the following year) to undo the conversion. Fidelity can walk you through this, but it's rare — most people don't change their mind after converting.

This guide is for general information only and is not medical, financial, legal, or other professional advice. For decisions specific to your situation, consult a qualified professional. See our Editorial Policy.