Reverse Rollover

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Topic Author
Osampat
Posts: 21
Joined: Tue Apr 02, 2024 4:22 am

Reverse Rollover

Post by Osampat »

Hello,

I am new to this forum so here is my backstory first. I recently transferred my traditional Ira and Roth IRA from northwestern mutual to fidelity to escape fees. I made that mistake 10 years ago because I knew nothing but now that’s the past and looking to self manage as much as possible moving forward. Looking for some suggestions on the topic if the reverse rollover and instead of paying fees for advice (exactly what I was aiming to get out of) thought I would bounce this here.

I am currently in the marginal tax bracket of 24 percent. I have been contributing the max to my 401k doing a 50/50 split between the traditional and 50/50 split. I plan to do this at least through next year before the tax laws potentially change. I am doing the same for my wife

Because I am not deferring the full 23k I believe that could be why we are starting to be phased out of the Roth IRA. My wife and I could each contribute 1770 this year so I did that. My wife does not have a trad Ira so I did the back door Roth for the remainder of the 6500 max contribution. However, I have not done this for me since I have a traditional Ira with pretax dollars rolled over from a previous employer. I have some after tax dollars as well but don’t want to convert it because I will be facing the pro rata rule.

Right now my total balance in the trad Ira is roughly 200k with 4950 dollars in non deductible contributions. I read in this forum I can roll the pretax dollars to my 401k and then convert the 4950 tax free and do the backdoor Roth this year.

It seems simple from a tax perspective especially since my 4950 basis is tracked on my 8606. However, I am weighing whether it makes sense from an investment standpoint, with funds more limited in the 401k. My 401k funds do not have high expense ratio but there are index funds (I believe large cap growth, small cap index, international and total bond, but I need to double check).

Any insight appreciated. I can provide more info if it helps.
terran
Posts: 3134
Joined: Sat Jan 10, 2015 9:50 pm

Re: Reverse Rollover

Post by terran »

This sounds like a good plan if your 401(k) provider allows rollovers from IRAs (you'll need to ask them) and has acceptable investment options (you can post fund names and expense ratios here if you want help determining that).
toddthebod
Posts: 5985
Joined: Wed May 18, 2022 12:42 pm

Re: Reverse Rollover

Post by toddthebod »

I did that last year. Our income exceeded the threshold, and I had a large rollover IRA from prior workplace plans. Mine was at Schwab, and my current workplace plan is at Fidelity. Both companies were very helpful in making it happen, which was important because it was impossible to exactly line up the information Fidelity gave me with the information Schwab was asking for on their form. In the end, after two ten minute phone calls, a check went out, I felt a little nervous for the week when the money was in the ether, but it showed up 8 days later in my Fidelity account.

You should get a 1099-R at the beginning of 2025 that you will report on line 4a of your 1040.

Make sure to liquidate everything to cash before you submit the reverse rollover form. That includes the rollover amount and the money you are leaving behind for the conversion. Then once the money shows up in your 401(k), convert the entire account. Check back once in a while to convert any straggling interest as well.
Topic Author
Osampat
Posts: 21
Joined: Tue Apr 02, 2024 4:22 am

Re: Reverse Rollover

Post by Osampat »

terran wrote: Tue Apr 02, 2024 6:34 am This sounds like a good plan if your 401(k) provider allows rollovers from IRAs (you'll need to ask them) and has acceptable investment options (you can post fund names and expense ratios here if you want help determining that).
Here are the funds and ER

https://postimg.cc/gallery/fJ6Yd8Z
Topic Author
Osampat
Posts: 21
Joined: Tue Apr 02, 2024 4:22 am

Re: Reverse Rollover

Post by Osampat »

terran wrote: Tue Apr 02, 2024 6:34 am This sounds like a good plan if your 401(k) provider allows rollovers from IRAs (you'll need to ask them) and has acceptable investment options (you can post fund names and expense ratios here if you want help determining that).
Here are the funds and ER

https://postimg.cc/gallery/fJ6Yd8Z
Topic Author
Osampat
Posts: 21
Joined: Tue Apr 02, 2024 4:22 am

Re: Reverse Rollover

Post by Osampat »

Osampat wrote: Tue Apr 02, 2024 7:08 pm
terran wrote: Tue Apr 02, 2024 6:34 am This sounds like a good plan if your 401(k) provider allows rollovers from IRAs (you'll need to ask them) and has acceptable investment options (you can post fund names and expense ratios here if you want help determining that).
Here are the funds and ER

https://postimg.cc/gallery/fJ6Yd8Z
One more note I didn’t include the target date funds but right now I am in a TD50 fund that is .0553 ER. I plan to rebalance into all index funds
terran
Posts: 3134
Joined: Sat Jan 10, 2015 9:50 pm

Re: Reverse Rollover

Post by terran »

Those look like great options. Either the target date fund or any/all of the index funds.
Topic Author
Osampat
Posts: 21
Joined: Tue Apr 02, 2024 4:22 am

Re: Reverse Rollover

Post by Osampat »

terran wrote: Tue Apr 02, 2024 7:29 pm Those look like great options. Either the target date fund or any/all of the index funds.
Thanks for the input! I was fairly confident but whenever I call fidelity they ask if I’ve talked to a tax advisor. I haven’t but feel this is straight forward based on my understanding from other posts.
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