Hi,
I have a traditional IRA (rolled over from prior firm's 401k plans) of $120k and am contributing $18k to my current employer's plan. My income is about $190k. My wife makes about $60k and also contributes the max to her 401k plan.
My understanding has been that our combined income is too high to contribute to Roth IRA accounts directly. However, I read about the Mega-backdoor option which assumes that my employer's 401k plan allows in-service withdrawals and after-tax contributions. I will check with HR next week if that is possible.
I'm now getting a little confused with what would happen to my traditional IRA account when I initiate the Mega-backdoor rollover (assuming that option is available to me). Would the pre-tax 401k contributions end up in my traditional IRA account and while the after-tax contributions are converted into a separate Roth IRA? Are there any additional conditions attached, e.g. that I would need to convert my traditional IRA to a Roth as well? (or did I get it confused this with something else)
Thank you -- aside from the IRA and our 401ks we just have a taxable investment account that we fund with our monthly savings. I would love to learn if there are any obvious ways we could be more tax efficient with our retirement accounts and taxable accounts going forward.
