Advice with Traditional IRA

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davidsonb
Posts: 6
Joined: Wed Oct 11, 2017 3:44 pm

Advice with Traditional IRA

Post by davidsonb » Sat Jan 13, 2018 2:28 pm

Need some advice on what is best course of action for my traditional IRA, somewhat new to managing my own retirement/investment accounts and think I may have made a mistake.

Emergency funds: 6 months in money market fun (1.3% interest rate)
Debt: school loans(about 50k) 3% interest rate, home mortgage 3.5% ($240K)
Tax Filing Status: Single, no dependents
Tax Rate: 33% Federal, no state income tax
State of Residence: Wa state
Age:36
Desired Asset allocation: 80% stocks / 20% bonds
Desired International allocation: 40% of stocks
Investing for long term growth

Portfolio Size: ~$260 (3 fund portfolio at vanguard accounts, 401K is vanguard lifestrategy growth at Lincoln Financial)
  • 401K, $50K (ER 0.68)
  • Vangaurd Taxable account $100K
  • Vanguard Traditional IRA-$41K
  • Vanguard Roth IRA-$62K
  • HSA $6850

The question I have is about my traditional IRA at vanguard. I made a non deductible contritibution at the end of 2017($5500) and recently made my non deductible 2018 contribution($5500) . My original plan was to backdoor the whole thing into the roth and just pay the taxes now. Before I do that I want to make sure I can't just roll the non deductible $11000 into the ROTH and roll the rest of the IRA into my 401K. My understanding is if I wanted to do that I should have rolled the IRA into the 401K BEFORE I made the non deductible contributions, correct? Probably should have done that but now looks like I don't have much of a choice and I'll need to just pay the taxes on the whole thing when I roll it over. Wondering if anyone has any thoughts, ideas, other options? I'm thinking just keeping it in the t-IRA isn't great because I'd have to pay taxes down the road on the gains from the non-deductible contributions. Paying the taxes on the backdoor isn't a big deal as I can swing it this year, just wondering if I have better options.

PFInterest
Posts: 1458
Joined: Sun Jan 08, 2017 12:25 pm

Re: Advice with Traditional IRA

Post by PFInterest » Sat Jan 13, 2018 3:01 pm

does your 401k accept incoming rollovers?

davidsonb
Posts: 6
Joined: Wed Oct 11, 2017 3:44 pm

Re: Advice with Traditional IRA

Post by davidsonb » Sat Jan 13, 2018 3:41 pm

Yes it does

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Duckie
Posts: 5717
Joined: Thu Mar 08, 2007 2:55 pm

Re: Advice with Traditional IRA

Post by Duckie » Sat Jan 13, 2018 8:40 pm

davidsonb wrote:I made a non deductible contritibution at the end of 2017($5500) and recently made my non deductible 2018 contribution($5500) . My original plan was to backdoor the whole thing into the roth and just pay the taxes now. Before I do that I want to make sure I can't just roll the non deductible $11000 into the ROTH and roll the rest of the IRA into my 401K. My understanding is if I wanted to do that I should have rolled the IRA into the 401K BEFORE I made the non deductible contributions, correct?
As long as the pre-tax amount of the TIRA is rolled to the 401k by the end of the year, the conversion will have no, or minimal, taxes. The IRS looks at all non-Roth IRA assets as of December 31st. You want the TIRA to be empty on 12/31/18. That's the only date that counts.

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