Backstory
I made a prior-year contribution to my traditional IRA in January, assuming it would be tax deductible. Unfortunately, that wasn’t the case. A complication arose because the non-deductible IRA contribution was already fully invested in my LendingClub IRA account. I ended up having to liquidate notes to execute a backdoor Roth IRA conversion.
Steps
- Liquidate notes on the LendingClub trading platform
- Move funds from the LendingClub Traditional IRA to the Self Directed IRA
- Close the LendingClub Traditional IRA
- Convert from a Traditional IRA to a Roth IRA
- Move funds from the Self Directed IRA to the LendingClub Roth IRA
Step 1 – Sell Notes
Liquidate your holdings by listing notes on the secondary market. Issued and Current notes are relatively easy to sell. You may need to lower the markup to liquidate faster.
Step 2 – Transfer Unsold Notes
In Grace-Period and Late notes are difficult to sell. If you have multiple accounts, transfer them to your other account. You can also use a third-party service such as PeerCube. The Minimum Markup strategy can be very helpful.
You can also submit a letter to forfeit all remaining notes in your account if you’re unable to liquidate all notes. You must send this from the email address associated with the LendingClub account you want to close.
Step 3 – Withdraw Funds
After your account has been liquidated, transfer funds from your LendingClub IRA to your Self Directed IRA. The withdrawal process took 2 business days to complete.
Step 4 – Close a LendingClub Traditional IRA
Submit an account cancellation request to LendingClub. My account was closed the following business day.
Step 5 – Backdoor Roth IRA Conversion
Submit a ROTH Conversion Request to Self Directed IRA to convert from a Traditional IRA to a Roth IRA. The conversion process took 5 business days to complete.
Step 6 – Transfer Funds to a LendingClub Roth IRA
Submit an IRA Investment Direction to Self Directed IRA to transfer funds to LendingClub Roth IRA. Your request will be processed the same day if you scan and email the form directly to operations@sdiraservices.com.
