Backdoor Roth Completed, but ???

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Topic Author
bruingent
Posts: 91
Joined: Fri Aug 02, 2013 8:58 am

Backdoor Roth Completed, but ???

Post by bruingent »

Here is the situation:

+My current accounts:
-Individual: -Traditional IRA and -Roth IRA
-New Employer: 403b, 457B, 401k
-Old Employer: 401k and 403b

I recently converted my previous employer retirement accounts (401 and 403b) into my traditional IRA and immediately converted into my Roth IRA. AT THE TIME OF THE CONVERSION, I have zero balance on my current employer retirement plans and zero balance on traditional IRA. So I will fill out the form 8606 to pay for the non-deductible part. My income for this 2018 year will be > 70000, so I won't have much of a deduction. I am anticipating paying a large amount in tax.
--> So, I think I did it right. Do you see any problem with this?

Also Question #2:
-Since the conversion, I have contributed to my New Employer accounts with the intention to max them out by the end of the year which is very doable for me. Do I have to consider my new contribution to the new employer's accounts in the 8606 form as well?

Thanks
mhalley
Posts: 10432
Joined: Tue Nov 20, 2007 5:02 am

Re: Backdoor Roth Completed, but ???

Post by mhalley »

To prevent activation of the pro rata rule, you just need to have zero in trad Ira as of dec 31. Money in 401k or 403b do not matter. Form 8606 is only for Ira, not employer plans.
Finance buff has 8606 tips here.
https://thefinancebuff.com/the-backdoor ... ow-to.html
Topic Author
bruingent
Posts: 91
Joined: Fri Aug 02, 2013 8:58 am

Re: Backdoor Roth Completed, but ???

Post by bruingent »

Hi Mhalley,
What about the 457b plan?
mhalley
Posts: 10432
Joined: Tue Nov 20, 2007 5:02 am

Re: Backdoor Roth Completed, but ???

Post by mhalley »

No problem with 457. the only concern is with trad Ira and employer plans like simple Ira or SEP.
FROM ED SLOTT Site
.When you calculate the total IRA balance to determine the taxable/non-taxable percentage, you must include all non-Roth IRA accounts. In addition to other traditional IRA accounts, it also includes any SEP and SIMPLE IRA balances. It does not, however, include Roth IRAs, inherited IRAs, or balances in employer plans.
Topic Author
bruingent
Posts: 91
Joined: Fri Aug 02, 2013 8:58 am

Re: Backdoor Roth Completed, but ???

Post by bruingent »

Thanks, have a nice day everyone.
Topic Author
bruingent
Posts: 91
Joined: Fri Aug 02, 2013 8:58 am

Re: Backdoor Roth Completed, but ???

Post by bruingent »

Just a follow-up question.

Do I really have to pay a large amount of tax? Since the money in my old employer accounts (401 and 403b) are already tax. Do I have to pay tax on these accounts? Or I just have to pay for the investment gains from these accounts only?
User avatar
retiredjg
Posts: 54082
Joined: Thu Jan 10, 2008 11:56 am

Re: Backdoor Roth Completed, but ???

Post by retiredjg »

Why do you think the money in the old employer accounts (401 and 403b) are already taxed? Were they Roth 401k and Roth 403b?

Usually, people use a 401k and a 403b to defer taxes...so the money in there is usually NOT taxed yet.
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