I have about $20,000 in a Vanguard tIRA, all from voluntary deductible contributions in the last 3 years..
My wife also has about $40,000 in a Schwab tIRA, with about 60% from a previous 401(k) rollover, and the rest contributory. If that makes any difference, funds have been purchased and sold a couple times and there’s no way to know which is which.
We will most likely recharacterize 2016’s contributions to Roth as I do not think we will qualify for the deduction this year. Next year should see a massive boost in income, and there is a good chance, depending on my wife's job prospects, that we will be above the Roth IRA threshold for married filing jointly taxpayers. Effectively I have to get rid of roughly $50,000 of tIRA in order to do backdoor Roths in 2017.
I have a shiny new 401(k) at Vanguard. My wife will have a shiny 401(k) somewhere when she finds a job.
Vanguard informed me this morning that my 401(k) plan doesn’t want my tIRA monies, and only accept rollover IRAs. According to the rep, it is fairly common for employer plans to only accept monies from rollover IRAs and other employers' plans.
Here are the choices I have identified, in no particular order of feasibility or foolishness:
1) Try to make the 401(k) plan accept the tIRA monies. I would have to somehow convince a Vanguard rep to make a check payable to Vanguard, and hope that there’s poor internal communication and nobody notices.
2) Do a Roth conversion now on both tIRAs. I would then be advised to rush and do the conversion this year as our marginal tax rate is definitely increasing in 2017. I really dislike the idea of paying taxes on a $50k conversion. I would be paying taxes on the whole amount, not just the contributions, right? I don’t see how else they could assess the liability with my wife’s tIRA that has rollover and normal contributions.
3) Come up with self-employment income. Open solo 401(k) and rollover the tIRAs into it. I don't even need to have regular contributions into the solo 401(k), just use it for rollover purposes.
Can you guys think of other options, or any pitfalls I may have overlooked?