nielsbohr wrote:Hmmm, both good points. Alright, so here's a question then (and sorry this is starting to drift somewhat from the original post)
Not a problem - it's your thread. You don't have to stay on topic, but it would be rude for the rest of us to wander too far astray.
Let's say I have 20k in contributions each in a regular and a roth ira. If I convert all of the regular ira into the roth ira (and pay the taxes of course), does it then mean that I have 40k worth of contributions in my Roth that I could withdraw in the future tax and penalty free?
No. Yes. Partly. It depends.
The $20k in ordinary Roth IRA contributions will always be available without tax or penalty. The other $20k is not so simple. (I hope I get this part right - these rules are difficult and hard to remember - I've already changed this thing 3 times as I remember different rules
If the contributions in the "regular" IRA were deductible, requiring tax on the conversion, that part is not immediately available without penalty (5 year clock starting January of the year you did the conversion).
If the contributions in the "regular" IRA were non-deductible and there are no earnings before the conversion (true back door), yes, that money would be available without penalty.
If the contributions in the "regular" IRA were non-deductible, that part would be available without penalty, but the earnings on the contributions would not (5 year clock) because the earnings triggered tax during the conversion.....but you have to take the part with the penalty first before you can get to the part that has no penalty.
Alternately, could I take out the 20k in contributions to the roth in the same year that I convert the 20k regular into the roth?
Yes. Roth IRA withdrawals have an order and the first thing to come out are the ordinary contributions.http://fairmark.com/rothira/distrib.htm
If either of these is yes, then that might very well tip me over into the pre-tax camp, since I would have the flexibility I'd need to be able to get at at least some of the money if I _REALLY_ needed it.
Huh? Nothing said above affects pre-tax vs Roth inside the 401k. But perhaps, you are just talking about being more comfortable with pre-tax contributions to 401k if you can make other adjustments in other areas.