Backdoor Roth question, no 401k right now

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iasw
Posts: 166
Joined: Mon Dec 05, 2016 2:02 pm

Backdoor Roth question, no 401k right now

Post by iasw » Sun Dec 03, 2017 9:52 pm

For the first time, our income exceeded Roth limits. I only have a Roth IRA, so Vanguard helped me move this year's Roth contribution and growth to a traditional IRA, then back to the Roth a few days later. Done.

But my husband has a tIRA and a Roth. The traditional contains about $95k from old company 401k rollovers.

He doesn't have a work 401k at present, so nowhere to transfer the traditional to.

If we backdoor Roth his, would we have to do the whole thing? Does it become a huge taxable event, or can we do a little at a time to spread it out?

I'm thinking we should just stick his 2017 in traditional and leave it there, but I'm not sure.

Iorek
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Joined: Fri Mar 08, 2013 9:38 am

Re: Backdoor Roth question, no 401k right now

Post by Iorek » Sun Dec 03, 2017 10:16 pm

You don't have to do the whole thing, but you will have to pay tax on roughly 95% of whatever you do put in the Roth. Might be better to leave it in the traditional.

DSInvestor
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Joined: Sat Oct 04, 2008 11:42 am

Re: Backdoor Roth question, no 401k right now

Post by DSInvestor » Sun Dec 03, 2017 10:20 pm

Did either you of you have any coverage by an employer plan for 2017? If you or he were W-2 employees, check W-2 to see if the retirement plan box is checked. If checked, then he was covered by an employer plan. If not covered, his Traditional IRA contributions would be fully deductible. In this case, there is no IRA basis and thus no problem with proration of IRA basis. His backdoor into Roth IRA would be made simpler because he would get a $5500 IRA deduction and the $5500 conversion is fully taxable essentially offsetting the IRA deduction. His Rollover IRA would not interfere with the Roth conversion if there is NO IRA basis.

If he was covered by employer plan for even 1 day in 2017, your high income will make his TIRA contribution non-deductible (IRA basis). IN this case, he has the option of keeping the TIRA contribution but needs to make sure to track the IRA basis with form 8606. When he later gets a 401k that will accept rollover from IRA, he can then do the rollover to isolate his IRA basis and then convert that basis tax free.
Last edited by DSInvestor on Sun Dec 03, 2017 10:24 pm, edited 1 time in total.
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iasw
Posts: 166
Joined: Mon Dec 05, 2016 2:02 pm

Re: Backdoor Roth question, no 401k right now

Post by iasw » Sun Dec 03, 2017 10:24 pm

No employer plan in 2017. One might be available in 2018 but I don't yet have details.

iasw
Posts: 166
Joined: Mon Dec 05, 2016 2:02 pm

Re: Backdoor Roth question, no 401k right now

Post by iasw » Mon Dec 04, 2017 8:57 am

Iorek wrote:
Sun Dec 03, 2017 10:16 pm
You don't have to do the whole thing, but you will have to pay tax on roughly 95% of whatever you do put in the Roth. Might be better to leave it in the traditional.
Woosh! If that's the case, then yes I will keep his in traditional.

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