I made a prior-year contribution to my traditional IRA in January, thinking that contribution would be tax deductible. Unfortunately that was not the case. An issue came up as the non-deductible IRA contribution was already fully invested in my Lending Club IRA account. I ended up having to liquidate notes to execute a backdoor Roth IRA conversion.
- Liquidate notes on the Lending Club trading platform
- Move funds from the Lending Club Traditional IRA to the Self Directed IRA
- Close the Lending Club Traditional IRA
- Convert from a Traditional IRA to a Roth IRA
- Move funds from the Self Directed IRA to the Lending Club Roth IRA
Step 1 – Sell Notes
Liquidate your holdings by listing notes on the secondary market. Issued and Current notes are easy to sell. You will have to lower the markup to liquidate faster.
Step 2 – Transfer Unsold Notes
In Grace-Period and Late notes are hard to sell. If you have multiple accounts, transfer them to your other account. You can also use a third-party service such as PeerCube. Minimum Markup strategy is your friend.
You can also submit a letter to forfeit all remaining notes in your account if you are unable to liquidate all notes. You need to send from the email address that is associated with the Lending Club account that you want to close.
Step 3 – Withdraw Funds
After your account has been liquidated, transfer fund from your Lending Club IRA to your Self Directed IRA. It took 2 business days to withdraw.
Step 4 – Close a Lending Club Traditional IRA
Submit an account cancellation request to Lending Club. My account was closed the next 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. It took 5 business days to complete.
Step 6 – Transfer Funds to a Lending Club Roth IRA
Submit an IRA Investment Direction to Self Directed IRA to transfer funds to Lending Club Roth IRA. Your request will be processed same day if you scan and email the form directly to firstname.lastname@example.org.