Is this a Backdoor Roth?

[kenmoremmm]

My wife has a traditional 401k with a small amount in it from a job many years ago; maybe $40k. It's with TRowe and I want to get it to Vanguard.

If we bring it over to Vanguard and do a Roth conversion, is this considered a Backdoor Roth and the mechanics of that type of conversion apply?
https://investor.vanguard.com/ira/roth-conversion

[ILikeDividends]

My wife has a traditional 401k with a small amount in it from a job many years ago; maybe $40k. It's with TRowe and I want to get it to Vanguard.

If we bring it over to Vanguard and do a Roth conversion, is this considered a Backdoor Roth and the mechanics of that type of conversion apply?
https://investor.vanguard.com/ira/roth-conversion

It is not a "Backdoor Roth,"  but it is a conversion, and the mechanics for executing it could generally be the same, depending on your broker.

A Backdoor Roth is for when your income is too high to contribute to a Roth or to a tIRA.  In that scenario you can pay income taxes on your post-tax contribution to a tIRA, and then convert the tIRA to a Roth right away so your growth in the future is tax free.  Whether the backdoor Roth conversion, itself, incurs additional taxes depends on your specific circumstances.  *

* Tax complexities apply to that conversion if you have any other tIRA accounts when you do a backdoor Roth conversion.  Google, "pro-rata" rule for more detailed information.  Or see: https://www.cnbc.com/2018/07/23/high-income-savers-use-this-tax-friendly-strategy-for-retirement.html

[FIREball567]

You can do a rollover to Vanguard into a traditional IRA first. Then decide if converting it to roth and taking the tax hit at your current income bracket makes sense.


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[jacoavluha]

or if your spouse has self employment income she could establish a solo 401k at Vanguard and then move the funds from the old 401k to the solo 401k via a trustee to trustee transfer. This may be the ideal route if your income is above the limits for deductible tIRA and direct Roth IRA contributions, in which case you want to do a backdoor Roth IRA, but you don't want the conversion to be subject to pro rata taxation. If your spouse doesn't anticipate doing backdoor Roth IRAs in the future then just rollover the old 401k to an IRA at Vanguard. The decision on whether to convert pretax dollars to Roth or not primarily depends on your current marginal tax rate