The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: cbr shadow on December 08, 2016, 04:50:54 PM
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This year will be the first year that my household income is over the limit to contribute to Roth IRA. I've been reading about a backdoor roth though, which sounds like a good option for me.
Here are a few facts:
- Household income (wife + Myself) = ~$250k
- Wife max 401k ($18k), I'm not yet eligible to participate in my new company 401k.
- I left my job in July and started a new job in August. Rolled 401k from previous job into a Vanguard IRA ($60k)
- 5 years ago my wife rolled her 401k from a previous job into a Vanguard IRA
I believe the fact that wife and I both have IRA's means we cannot do the backdoor roth ira, correct?
If that's the case, I should be able to roll my IRA into my new company 401k in a few months (which has good options) then proceed with the backdoor roth.. correct?
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You can do the backdoor but you will have to consider your existing ira tax implications. So yes. An option is to roll your IRA into 401k first. Then contribute to IRA and roll into a Roth
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I completely agree with saywhatnot: "You can do the backdoor but you will have to consider your existing ira tax implications"
You need to roll existing pre-tax IRAs, that you do not want to convert to a Roth, into your new employer's 401k. Otherwise, you subject them to taxation. Not all 401k plans allow incoming rollovers, so check with your employer or, even better, check with your employer's 401k administrator as most HR departments are clueless when it comes to 401k plan details.
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similar situation here.
My thoughts - why roll tIRA/t401k into a roth during the high earning (accumulation) years? Why not wait until later, when salary will be reduced (early fire? or only 1 working adult,etc). Then you will be paying less taxes on the rollover, no?
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You can do the backdoor but you will have to consider your existing ira tax implications. So yes. An option is to roll your IRA into 401k first. Then contribute to IRA and roll into a Roth
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This is what we had to do when starting to backdoor. But because I couldn't get the IRA provider to do the paperwork with the 401k provider, I ultimately had to cash out the IRAs and then deposit them straightaway into the 401k. It was fairly smooth on my end, but word to the wise: Save your documentation if you have to do the consolidation the way I did! The IRS thought I'd cashed out my IRAs and a couple years later sent us a bill for all the taxes and penalties. It's sorted out now, but make sure to keep all your paperwork for a few years.
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You can do the backdoor but you will have to consider your existing ira tax implications. So yes. An option is to roll your IRA into 401k first. Then contribute to IRA and roll into a Roth
Sent from my iPhone using Tapatalk
This is what we had to do when starting to backdoor. But because I couldn't get the IRA provider to do the paperwork with the 401k provider, I ultimately had to cash out the IRAs and then deposit them straightaway into the 401k. It was fairly smooth on my end, but word to the wise: Save your documentation if you have to do the consolidation the way I did! The IRS thought I'd cashed out my IRAs and a couple years later sent us a bill for all the taxes and penalties. It's sorted out now, but make sure to keep all your paperwork for a few years.
Wow. That would be a shocker to see that bill!