Thank you for helping me think this through!
- I have approximately $30k in a Traditional IRA.
- Approximately $24k of this was rolled over from a workplace 401k in March 2019 (therefore pre-tax money)
- $6k of this is post-tax money (non-deductible) which I mistakenly deposited (2 weeks ago) thinking I could convert just this amount into my ROTH IRA (I subsequently learnt about the pro-rata rule which subsequently gave me a headache for days)
- I have an available 403b with TIAA (currently empty)
[Option A] "Convert the entire Traditional IRA to Roth, and pay tax on the pre-tax amount of the conversion. For a small Traditional IRA this may be the easiest and best option, but if the Traditional IRA is large, this will result in a large tax bill. If you are making Backdoor Roth IRA contributions, you are in a middle or high tax bracket, so this might be undesirable."
[Option B] "Roll the pre-tax portion of the Traditional IRA into your 401(k) or 403(b) at work, assuming it accepts rollovers. If the employer plan has poor investment options and/or high fees, this may be undesirable. However, if the employer plan is large and well-managed, it may have access to institutional share classes with even lower expenses than are available in the IRA."
I'm leaning towards Option A. The increase in “income” should not put us in a higher tax bracket + I will be able to retain this money within my Fidelity portfolio. I’m in my late 30’s so it makes sense to up my tax free growth buckets.
Option A Question: How do I determine what the amount is that I pay tax on? Do I need to request a statement from my old 401k provider to determine the contributions. Is the taxable amount the contributions + gain? What about the $2-$3 of interest on $6k of post-tax money?
Fidelity also asked me what I will be "Withholding" during the transfer/conversion. I don't even know what that means...
Option B Question: How do I determine how much I’m legally allowed to transfer? Is it everything except the $6k?
I just wanted to ask there if there is anything I am missing before I go ahead with Option A. What would you do?