Questions About This Backdoor Roth Article

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catchinup
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Joined: Sun Dec 31, 2017 6:35 pm

Questions About This Backdoor Roth Article

Post by catchinup »

I just read this article and it mentioned a couple of items I did not know and I am not sure they are correct.
https://wealthofgeeks.com/mega-backdoor-roth-ira

1. In the discussion on Backdoor Roth, it says having a tax deferred 401k from a previous employer counts against the pro rata rule. I thought 401ks were exempt.

2. It says to contribute to mega back door Roth, you must max out your tax deferred contributions first. Fortunately I have been doing this anyway, but was not aware that was an IRS requirement?

Thanks for any comments
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plutoblackhole
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Location: Kuiper Belt

Re: Questions About This Backdoor Roth Article

Post by plutoblackhole »

The article is wrong on both counts :oops:

Edit: what they mean by point 1 is that you can’t have a rollover IRA, which is of course just a traditional IRA. If the money is still in the 401(k) plan it’s no problem. Very poorly worded on their part.

For the second part, maybe some employers don’t allow voluntary after tax contributions until you’ve maxed deferrals, but there’s no problem to do the entire $61,000 as a mega backdoor of you wish.
Last edited by plutoblackhole on Thu Sep 22, 2022 7:33 pm, edited 5 times in total.
sailaway
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Re: Questions About This Backdoor Roth Article

Post by sailaway »

The article is wrong, but for number two, some plans do have that requirement. This can really come into conflict with certain matching programs.
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SmileyFace
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Re: Questions About This Backdoor Roth Article

Post by SmileyFace »

For #1 - the article isn't necessarily wrong just poorly worded (the whole article is bad in my opinions - not a great journalist/writer authored it for sure).
It states:
Ensure that you don’t already have a large IRA account, including a 401(k) from a previous employer.
The author probably means to say "including a 401k from a previous employer thay was rolled into an IRA".
I am not the best writer - but maybe better than the author of the site you are reading.
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retiredjg
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Re: Questions About This Backdoor Roth Article

Post by retiredjg »

The article is not only wrong on both of those counts....it is wrong in several other ways as well.

I think much of the problem is the result of the author thinking that all kinds of work plans (401k, 403b, TSP, etc.) are IRAs. They are not IRAs, but many of the incorrect statements in the article could be attributed to thinking that.

The author also does not seem to understand that not all contributions to tIRA are tax-deferred. That would account for several other incorrect statements.

Not a reliable resource. Unfortunate. :?
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SmileyFace
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Re: Questions About This Backdoor Roth Article

Post by SmileyFace »

The author has another article on how to make money by photographing your feet. I wonder how accurate that one is. 🤔
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