The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: WannaBFree on November 08, 2016, 03:24:58 PM
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Hello,
I have about 60K in my 401(k) with my old employer that I need to either roll over into my current 401(k) via direct roll-over or or to do a mega backdoor Roth IRA conversion. Can someone who has done a conversion walk me through the steps that need to be taken and your reasons of why you decided to go with the conversion?
Thank you in advance!
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First, to clear up some terminology: a "mega backdoor Roth conversion" is generally referring to the conversion of after-tax, traditional 401(k) money to Roth. If you have this type of money, you should definitely convert it to Roth as the traditional after-tax bucket is a worse place to leave your money for the long term than Roth, and converting is unlikely to have much effect on this year's taxes.
If you have pre-tax traditional funds in your IRA, a Roth conversion would require you to pay tax on the entire sum this year. Probably not what you want to do! This type of conversion is also not typically called "mega backdoor."
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What you are describing doesn't sound like mega back-door Roth conversion.
If your new 401k plan allows you to bring in money from an old plan, you can do that. It won't trigger a taxable event (unless you change pre-tax 401k old money to Roth in new 401k).
You can also roll over your old 401k into an IRA - or more than one IRA if you have both pre-tax and Roth money in your old 401k.
Neither of the above options is mega back-door Roth conversion.