theeryman wrote: ↑Thu Oct 15, 2020 6:06 pm
The only hope is to roll all 3 of your IRAs into your current Solo 401k...but I suspect your Solo 401k is at Vanguard....which will not accept a rollover. Is it? Are you willing to move it? Say, to Fidelity?
I would if it really made sense, but it's starting to sound like a bigger hassle than it's worth. But tell me if you think it's worth it, as I'm here for your opinions
To be real honest with you, I may not be the best person to give an opinion on this. I am not nearly as pro-backdoor as the majority of the people on this board. Just about everyone else here will tell you to go for it.
Doing the backdoor is easy...a few clicks of a mouse. The documentation on your taxes trips a lot of people up. A few years ago, I decided to stop recommending the backdoor because so many people mess it up. While I no longer recommend it, I still help people with it.
Whether it is worth it to you, I don't know. Most people seem to think so.
What you will have to do is move your Solo 401k to a provider that will accept incoming rollovers so you can get these other 3 accounts out of the way. Then roll those 3 accounts (but not the $6k contribution) into the new Solo 401k. Then you can convert that remaining $6k to Roth IRA. Do your taxes. It will likely be up to you to get this done right - a lot of tax-preparers have no idea what to do. And then you are clear to do it again the following year(s).
Oh yes, you do not need to have Vanguard return your 2020 IRA contribution to you if you are able to roll everything else into your [Solo 401k. You cannot roll that contribution into the 401k though.
I'm not following why, or in what case, I'd need to have my 2020 IRA contribution returned. Mind explaining that part?
When I first said you need to have your contribution returned, I though you were contributing to a SEP IRA each year. That would involve pro-rating your SEP IRA with the backdoor every time you do the backdoor. Most people do not want to do that.
The only way to avoid the pro-rating - since you have now mixed pre-tax and post-tax money in IRA - is to take out the post tax money as if the contribution never occurred. It's a do-over.
If you decide not to go forward with your backdoor plan, I would take advantage of the do-over and have them return that contribution as if you never made it. You have some time to decide - til October 2021.
Roth IRA is a great and wonderful thing. But investing in a taxable account is good as well, not quite as good as Roth, but plenty good enough. You do not have to use Roth IRA to be a successful investor so don't feel any pressure about that.
If you are interested in learning more about the backdoor, there are literally thousands of threads about it. There is also information in the Wiki.