401k Rollover IRA & Backdoor Roth Question

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FootballFan5548
Posts: 297
Joined: Mon May 01, 2017 2:20 pm

401k Rollover IRA & Backdoor Roth Question

Post by FootballFan5548 »

I recently left my employer after a 13.5 year run. I've accumulated a sizeable 401k and the holding options I have actually aren't bad... so I can just keep it with my old employer.

I have all of my other investments at Vanguard. If I wanted to rollover this 401k into an IRA at Vanguard, am I still able to perform backdoor Roth conversions by contributing to a different IRA and then clearing that out to zero when I backdoor it to Roth?

I know there's some rule about not having an actual IRA balance after the backdoor...

Simple question, can I still perform backdoor Roth if I have a rollover IRA with a balance?

Thanks
Silk McCue
Posts: 6046
Joined: Thu Feb 25, 2016 7:11 pm

Re: 401k Rollover IRA & Backdoor Roth Question

Post by Silk McCue »

No you can’t. Please see the Wiki for further information.

https://www.bogleheads.org/wiki/Backdoor_Roth

Cheers
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Wiggums
Posts: 4484
Joined: Thu Jan 31, 2019 8:02 am

Re: 401k Rollover IRA & Backdoor Roth Question

Post by Wiggums »

FootballFan5548 wrote: Wed Nov 24, 2021 8:55 am I recently left my employer after a 13.5 year run. I've accumulated a sizeable 401k and the holding options I have actually aren't bad... so I can just keep it with my old employer.

I have all of my other investments at Vanguard. If I wanted to rollover this 401k into an IRA at Vanguard, am I still able to perform backdoor Roth conversions by contributing to a different IRA and then clearing that out to zero when I backdoor it to Roth?

I know there's some rule about not having an actual IRA balance after the backdoor...

Simple question, can I still perform backdoor Roth if I have a rollover IRA with a balance?

Thanks
The backdoor Roth IRA pro-rata rule regulation that can have implications for anyone executing a backdoor Roth IRA conversion. It stipulates how the IRS will treat pre-tax and after-tax contributions when the taxpayer executes a Roth conversion.

When the IRS determines your backdoor Roth IRA conversion taxes, they will regard all of your current IRA accounts as one entity. This is known as the aggregation rule – no IRA stands alone; instead IRAs are regarded in the aggregate.

The pro rata rule states that taxation of IRA accounts when converted partially or fully to Roth accounts will be calculated proportionally to the fraction of after-tax vs. before-tax contributions. The percentage of funds that are yet to be taxed will be taxed at the pro rata rate, regardless of whether you are transferring all or one of your accounts at once.
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