March 2012: contributed $5000 to a traditional IRA for 2011 (8606 form filed with 2011 taxes), converted to roth in March of 2012
November 2012: switched employers and rolled over my 403b and money in to a Roth IRA
Now for the fun part! I have changed my mind about converting my 403B to a Roth IRA. I now live in a state with high taxes and a city tax, and I'm going to owe maximum rate federal taxes on the conversion. So, I plan on recharacterizing this to a traditional IRA.
My understanding is that this will mess with my back door roth. I have about $50,000 in the 403b that will become a traditional IRA after recharacterization, so I will owe taxes on 90% of my back door roth conversion right? If so, not the end of the world but having a traditional IRA will now negate the benefits of back door roth in the future. Wishing now that I just left my 403b with my previous employer
These are my options (I think)
1) go ahead an pay $18,000 in taxes to convert my 403b money to a Roth IRA, then my back door roth is fine (I just think I would rather invest that $18,000 instead of paying the federal/state/local taxes)
2) decide not to convert my 403b to a roth, then I will owe about $1800 on my back door roth conversion AND won't be able to do any meaningful back door roths in the future b/c I now have a large tradtional IRA
3) recharacterize my back door roth conversion and see if my new employer (which also offers a 403b) will take my traditional IRA as a 403(b). This is my favorite option I think b/c I would then be able to do back door roths in the future. However, even if my employer does accept the IRA to my 403b I assume I will still be forced to pay taxes on my 90% of my back door Roth for 2012?
Anything I'm missing? Any other options?