The Optometrist's Guide to Roth IRA and How to do a Backdoor Roth
Chapter 2B: How to do a Backdoor Roth with Fidelity | Step by Step Instructions
Update for 2026 Tax Laws:
In this chapter, we will show you a step-by-step guide (with screenshots) on how to do a Backdoor Roth for new investors. We will be using Fidelity as an example, but other major brokerages will have similar steps.
Before we get started, here are 4 requirements before attempting to do a backdoor Roth IRA:
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(1) You CANNOT have any tax-deferred money in any existing IRAs such as a traditional, SEP or SIMPLE
If you do, you need a strategy to move that money to a Roth-IRA (W2) or solo 401K (1099/S-Corp) via IRA rollover and be aware that there might be a tax bill due on the conversion.
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(2) Set up 2 Separate Accounts: Trad-IRA | Roth IRA
We will use the same two accounts to do the backdoor Roth conversion each year. So keep both accounts open!
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(3) Have the full amount $7,000 (for 2025 Limit) to fund for the 2025 Contribution first, then $7,500 for 2026
We recommend doing the full $7,000 in one step for the previous year first (2025) if you haven't done so since you have until 12/31/25 to do the backdoor Roth conversion.
⚠️ Then If you have another $7,500 to contribute, then you can make a 2026 contribution as well, but while you are able to CONTRIBUTE to a Trad/IRA until 4/15/27, you only have until 12/31/25 (of that year) to do the backdoor Roth conversion.
Note: During 2026, you can do $625 each month into a trad-IRA ($7,500 total) and select the standard "money market" fund BUT DO NOT INVEST ANYTHING until it is fully converted into the backdoor Roth IRA. You might get a few $1-2 in gains but IRS will round down to $7,500 end of the year.
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(4) Repeat for your spouse (if applicable)
You can contribute another $7,500 for your non-working spouse via Backdoor Roth IRA as well for 2025 and 2026
Step 1: Open up an account with Fidelity
If you are new to Fidelity, it is pretty straight forward, so we won’t go through all the steps. Again, make sure you open BOTH Trad-IRA and Roth IRA accounts.
Step 2: Contribute $7,500 to your Traditional IRA First
Once you open both your Trad + Roth IRA accounts, go into your Trad IRA FIRST, you should automatically have a Fidelity Federal Money Market Fund (Settlement Fund). This is basically cash, and where we can use to hold any money for transactions.
Next, Contribute $7,500 to the Trad-IRA account for 2026.
⚠️ Note: I already contributed $7,000 for 2025 already in Jan 2025
Next, select where the Money is COMING FROM? In this case, we are going to transfer it from a personal checking account. You can transfer it from other Fidelity accounts as well.
Then tell Fidelity where your money is GOING TO for your 2026 Contribution (this amount would be $7,500), and it will automatically be placed in your Federal Money Market.
7-14 days Fidelity Holding Period
⚠️ PLEASE NOTE that in 2026, Fidelity drastically increase their holding settlement period to over 7-14 days if you do the transfer on FIDELITY, from your checking bank , which negatively impact the Backdoor Roth IRA causing gains, resulting in a MORE complicated tax situation at the end of the year.
So we do recommend doing a ACH TRANSFER from your checking bank to Fidelity avoid this delay, just notate your Trad IRA Account #.
Finally, you will click Accept and get a Confirmation Statement
Step 3: Wait 7-14 days for money to settle before making the Roth Conversion
It usually takes a 7-14 for the $7,500 to transfer from your Checking account to your Trad IRA.
⚠️ It might take up to 10+ days for your money to settle in your Trad IRA before you are able to convert due to Fidelity's new Security requirements in 2025
⚠️ DEADLINE: While you can CONTRIBUTE $7,500 for 2026 to a Trad or Roth IRA until 4/15/27, you only have until 12/31/26 (of that year) to do the Backdoor Roth conversion.
Step 4: Convert your $7,500 to a Roth IRA via Backdoor
- (1) Once your $7,500 Settles in your Trad-IRA
- (2) Go to the top Menu "TRANSFER"
- (3) Within your Trad-IRA account, select "Transfer to Roth IRA", once your $7,500 has settled in your available balance
- (4) Tax Withholding Information : Select "I understand that I'll likely have to pay taxes later"
- You will be given some information that the conversion is a taxable event that cannot be reversed. Well this isn’t exactly correct, because the final net contribution is a non-deductible $7,500 contribution.
- For 2020, there is a new tax reform that eliminates the ability to re-characterize (or undo) Roth Conversions.
Choose the account (Trad IRA) to convert. Make sure you TRANSFER "Convert" ALL of the account
- Leave this Trad-IRA account open so we can use it for next year, then hit CONTINUE
F Review and Submit
⚠️ If you get this message "We're unable to process your transaction because you have another request in progress. Choose another account or wait until your request is complete".
This means that your money have NOT settled yet and might take up to 10-14 days with Fidelity's new security.
For example, I had around $7,520.80 due to the small gains for 14 days, so just cover the entire $7,520.80, pay taxes on $20.80 and have your CPA/Adjust via fill out the FORM 8606 end of tax season.
Step 5: Select your investment funds within your Roth IRA
Remember to buy your funds once you have the $6,500 in the money market. BUY YOUR INVESTMENT FUNDS. Think of your Roth IRA as an additional retirement accounts, so choose your investments accordingly.
Financial Reminder
"Please remember that once you convert money market fund (basically cash) from your Trad IRA to Roth IRA, you actually have to chose + BUY the Index Funds ETF like a Vanguard Total Stock Index (VTI) for it to grow within your Fidelity Brokerage account. It is surprisingly too commonplace to see many doctors who are shocked why their Roth IRA return 0% for the last 5 years because they forgot to select the investments"
Step 6: Repeat for your Spouse (if applicable)
If you are married and file jointly, then your spouse can also do a backdoor Roth for an additional $7,500 even if he or she doesn't have an earned income.
Step 7: Fill out Form 86060 in your 1050 during your tax season
Here is what your IRS form 8606 should look like, but if you want additional instructions from IRS, find out more here.
*Note: This is example of 2023, but your number should be $7,000
TurboTax user: Check out the Finance Buff’s Direction on TurboTax or Check out Youtube Step-by-step direction
Step 8: Repeat every year before April 15 (Tax Deadline)
I usually like to do my Roth IRA backdoor every year around January. I do the full $7,500 amount on the same month of every year. Remember this will go into your Money Market Fund, so you will have plenty of time to choose your investments. If you forgot to do it for 2025, you have until 4/15/2026 to convert $7,000 for 2025
I recommend selecting your investment funds as soon as possible, so your money can start working sooner.
