Ruminations On A FI Milestone – First Backdoor Roth IRA

Ah… the FI milestones.  The sacred and unassailable truths that make the FI community what it is.  Look underneath the hood of that unstoppable, dogmatic FI machine and you’ll see the elaborate clockwork of the financial independence rhetoric ticking away like the birth of time itself. 

I’m even guilty of it.  Before I found my writing groove (and sanity), I referenced the 7 stages of financial independence (as every beginning FI blog does – I know, I was new and inexperienced – just don’t start making up your own FI categories, then you’ve really fucking lost it) that made the most sense to me in my very first FI status post, “Our Current FI Status.”  It’s kind of embarrassing looking back, drinking all of that FI cool-aid and slopping around the blogging world like a sorry sucker with my balls cut off.  And then finally I began to learn and cut through all the bullshit – scourge the FI landscape like a pirate after buried treasure and hoard those little gems of hidden truth when I stumbled across them. 

Because there is a ton of stinking shit in the FI world you need to wade through before you get to what’s really important.  And it took me awhile to eventually find the truth – there are only two stages of financial independence: you are either FI or you aren’t.  And everything in-between doesn’t mean shit.  Sure, you’ll get all the what about the journey people chiming in, but my question is, doesn’t the journey after the destination count as well?  Plus, if you’re going to mirror your life after something, better to pick someone who has actually ACHIEVED FI rather than the million of FI blogs like myself, that haven’t even come close to walking that walk yet… or if ever. 

I know.  I really do.  If you look up the FI Bible in the Twitterverse, I believe if my memory serves me correctly, it says on page 353, verse 2: “All ye who criticize the farce of FI eBooks, coaches and #FI label/category creators, you will burn in hell for eternity.”  Yep, that’s me.  Guilty as charged. 

Alright, enough digression and back to the topic at hand – the christened, all-mighty savior and bastion of success from all those doctors in FI: the worshiped and diamond studded backdoor Roth IRA. 

This is a first world FI milestone, let’s be clear on that.  I don’t expect many to relate unless you’re a high earner – and yes, this is privilege shrouded in the darkness of excess at its finest.  You get no defense or argument from me here – caught red handed.

I’ll also preface, that there’s going to be an ironic twist in the end.  I’m not writing simply to rub it in your face, “oh, wow, look at me, I get to do a back-door Roth IRA conversion, so I’m so FI savvy and on my way to a blissful life!”  No, No fucking way.  This ain’t that shit at all.  I actually have despised the backdoor Roth IRA for years.  It has been my nemesis, the counterbalance to my existence as I’ve waged an epic war spanning millenniums in the FI-verse. 

Why you ask?  How can this be the case? 

Because accepting the backdoor Roth IRA, meant only one thing… I had failed. 

For the past few years, I’ve been pushed to my limit in figuring out ways to lower my MAGI (modified adjusted gross income).  For those of you not in the know, this is the income limit that is used to calculate the limit on the Roth IRA contributions per your tax filing (if you want to learn more, Google it, I’m too fucking lazy today to link to anything.) So, I’d max out our 401Ks, lock in capital losses, etc., etc., to thwart this evil foe with any tactic available at my disposal.  Things would come close at the end of the tax year, but I had always been able to manage one miracle after another and sneak below the threshold like a thief in the night. 

But then, like everything in life, my reign of luck came to an end.  I had the biggest problem that had ever faced mankind, I was going to make too much money and there was no way to be under the Roth IRA limit.  I finally had met my match. 

I scrubbed the numbers, built excel models so robust not even an earthquake could budge their foundation.  I lobbied Congress and tweeted at crazy Uncle Donny to reform the US of A.  But it was all to no avail.  The time had come. 

So, I did what every other high earner in the FI community does, I set up linked IRAs, and then in the first week of January 2020, I made my contributions and did the conversions. 

How did it feel?  Probably anti-climactic would be the right words.  Here I was joining the FI elite, I’d now get to rub elbows with all those FAT Fire aficionados who had sniggered down at me from their gluttonous income perches, yet I couldn’t care less.  Like I described in the beginning of this post, FI milestones just don’t matter to me anymore.  For a lot of people they are important, these are what they use to motivate themselves, define themselves.  But for me, they’re all just smoke and mirrors – you are either free, or you’re not.

Now to the irony… 

The year was set.  Our shiny new backdoor Roth IRA conversions were glittering like the pure gold they were as we started the year off with a bang.  And then good ol’ lady luck reared her ugly head and shat on my parade like mudslides after the fire season. 

The pandemic hit – more like shrouded the world in a veil of fear, stumbling blindly into the fog of war against an invisible foe with unknown limits.  New fun and games all around, right? 

Well, I take pride in being a planner.  When it comes to finances, I almost always have a contingency plan for my contingency plan.  But there was no way I saw this virus coming.  And just like the rest of the world, I was served a slice of humble pie and ate it all in one gigantic gulp.  The medicine burned as it went down, but down it did go. 

As I’ve mentioned over the past few months in previous posts, my wife was furloughed in mid-March and all my estimated income calculations went out the window.  I’m sure many people have found themselves in a similar situation or much worse. 

But it was funny to reflect back on all of my planning and tax estimates to try and avoid the backdoor Roth IRA.  Here I was obsessing over these minor details and then life punched me in the face.  Well, not just me, everyone and of course my quibble in this post is not that important in the greater scheme of things.  But it just goes to show you how quickly things can change. 

So, after reaching this FI milestone in the beginning of the year, it now looks like with my wife’s reduced income, we would have been able to do the normal Roth IRA contribution anyway.  Hahahaha.  Fucking hilarious!!!  All of that work and worry for naught.  And technically, I still have not actually achieved this FI milestone.  But who’s really keeping track, right? 

Now, don’t get me wrong, I’m thankful for reaching a certain income level in my life and write all of this tongue and cheek, if you can’t feel the sarcasm slicing through like a hot knife through butter, then you might not be able to hang with this blog.  Just being honest.  If you want some safe and sappy, “Here’s how I doubled my income in one year, you can do it too!”  Then that’s fine.  You’re probably only a week away from publishing your own eBook FI memoir that will save our souls and lead to world peace. 

And if that’s the case… God help us all. 

But in the meantime, maybe you should strive for a more capitalistic and self-serving goal, like hitting that grand ol’ FI milestone of the backdoor Roth IRA. 

Because the FI elites will always be staring down at you… twiddling their thumbs and waiting. 

-Q-FI 

— 

P.S.  How about you… every reach the holy backdoor Roth IRA status or written about FI milestones?