401k with no employer match

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toddthebod
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Re: 401k with no employer match

Post by toddthebod »

afr wrote: Mon Apr 29, 2024 2:15 pm This is a copy of an email I just received from Capital Group/American Funds that was fowarded to me and my contact at Raymond James(who handles our 401k)-

Hello,
Our records doesn't indicate $100,000.00 has been received for Andrew. Just to be clear, the Incoming Direct Rollover forms do not initiate a rollover from another custodian. The participant must work with their former provider if they are rolling funds into this plan.
Upon receipt of the incoming rollover check, Incoming Direct rollover forms authorize Capital Group to deposit the check. The previous provider information isn't completed on the forms. Thank you.
If you have any questions, please do not hesitate to contact us at the number or email address below.

Cordially,
Retirement Plan Services

Does this mean I have to request a check from Vanguard(where I have my tIRA) to be sent to me and then send to Capital Group?
Yes, but they should be able to mail the check directly.
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afr
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Re: 401k with no employer match

Post by afr »

Kind of a silly question; so if the current value of my Vanguard tIRA account changes a little on a daily basis, how do I know exactly how much to move(pretax portion) to my employer 401k? I know the basis amount(80k), but the pretax portion varies day to day depending on the market. And do I have to move the pretax portion in the tIRA fund to the settlement account first prior to completing the IRA distribution form?
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FiveK
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Re: 401k with no employer match

Post by FiveK »

afr wrote: Thu May 02, 2024 9:23 am Kind of a silly question; so if the current value of my Vanguard tIRA account changes a little on a daily basis, how do I know exactly how much to move(pretax portion) to my employer 401k? I know the basis amount(80k), but the pretax portion varies day to day depending on the market. And do I have to move the pretax portion in the tIRA fund to the settlement account first prior to completing the IRA distribution form?
Some options:
- convert $80K to Roth, then move the remainder to the 401k. Do this, however, only if you are certain the 401k will accept the incoming rollover.
- give yourself a cushion, e.g., aim to leave $81K in the tIRA when you move money to the 401k. Then convert the ~$81K and owe tax on ~$1K.
- move the entire tIRA to fixed income. Then move all but $80K to the 401k. Then convert the remainder ($80K plus whatever interest) and owe tax on the whatever interest.
placeholder
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Re: 401k with no employer match

Post by placeholder »

FiveK wrote: Thu May 02, 2024 1:01 pm - move the entire tIRA to fixed income. Then move all but $80K to the 401k. Then convert the remainder ($80K plus whatever interest) and owe tax on the whatever interest.
The pretax has to be in cash for the rollover anyway and these days having the aftertax in mm for short period isn't likely to cost much with 5% rates so this is the way that makes sense to me.
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afr
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Re: 401k with no employer match

Post by afr »

Thank you for your replies. I completed and submitted the IRA distribution form and received notification that Vanguard is processing my request. Not sure how long that'll take for them to forward the check to my 401k account.
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afr
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Re: 401k with no employer match

Post by afr »

Since my 401k will accept incoming rollovers, I moved 101k from my tIRA to the settlement account and Vanguard is sending/sent a check(currently pending) to the address and account of my 401k account that I provided them on the distribution form. At the moment, my tIRA has a value of 83k with 80k basis. Would it be wise to wait for my tIRA fund to drop back to 80k so I won't have to pay any taxes on the 3k when I convert it to my RothIRA?
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FiveK
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Re: 401k with no employer match

Post by FiveK »

afr wrote: Mon May 06, 2024 11:44 am Since my 401k will accept incoming rollovers, I moved 101k from my tIRA to the settlement account and Vanguard is sending/sent a check(currently pending) to the address and account of my 401k account that I provided them on the distribution form. At the moment, my tIRA has a value of 83k with 80k basis. Would it be wise to wait for my tIRA fund to drop back to 80k so I won't have to pay any taxes on the 3k when I convert it to my RothIRA?
If you are prescient enough to know that will happen, sure. Otherwise, send another $3K to the 401k, or convert the whole $83K and pay tax on the $3K, or convert only $80K and (assuming $3K in the tIRA on 31-Dec-2024) pay tax on $2892 with a remaining basis of $2892 for TY2025, etc.
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afr
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Re: 401k with no employer match

Post by afr »

FiveK wrote: Mon May 06, 2024 12:22 pm
afr wrote: Mon May 06, 2024 11:44 am Since my 401k will accept incoming rollovers, I moved 101k from my tIRA to the settlement account and Vanguard is sending/sent a check(currently pending) to the address and account of my 401k account that I provided them on the distribution form. At the moment, my tIRA has a value of 83k with 80k basis. Would it be wise to wait for my tIRA fund to drop back to 80k so I won't have to pay any taxes on the 3k when I convert it to my RothIRA?
If you are prescient enough to know that will happen, sure. Otherwise, send another $3K to the 401k, or convert the whole $83K and pay tax on the $3K, or convert only $80K and (assuming $3K in the tIRA on 31-Dec-2024) pay tax on $2892 with a remaining basis of $2892 for TY2025, etc.
I think it would be too much trouble to send another 3k to the 401k at this point. I realize I'm going to have to pay taxes on it either way. However, I'm currently in the 24% tax bracket and if I send the 3k to my 401k I'll be taxed on it at a lower rate when I retire in 3 yrs. Is it even worth it or am I just being pound foolish?
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FiveK
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Re: 401k with no employer match

Post by FiveK »

afr wrote: Mon May 06, 2024 1:29 pm I think it would be too much trouble to send another 3k to the 401k at this point. I realize I'm going to have to pay taxes on it either way. However, I'm currently in the 24% tax bracket and if I send the 3k to my 401k I'll be taxed on it at a lower rate when I retire in 3 yrs. Is it even worth it or am I just being pound foolish?
Assuming a 12% rate instead of 24%, that's a difference of $3K*(24% - 12%) = $360. How you look at that is up to you.
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afr
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Re: 401k with no employer match

Post by afr »

FiveK wrote: Mon May 06, 2024 1:41 pm
afr wrote: Mon May 06, 2024 1:29 pm I think it would be too much trouble to send another 3k to the 401k at this point. I realize I'm going to have to pay taxes on it either way. However, I'm currently in the 24% tax bracket and if I send the 3k to my 401k I'll be taxed on it at a lower rate when I retire in 3 yrs. Is it even worth it or am I just being pound foolish?
Assuming a 12% rate instead of 24%, that's a difference of $3K*(24% - 12%) = $360. How you look at that is up to you.
Wouldn’t that amount be lower since I wouldn’t be paying 24% on the entire 3k?
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FiveK
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Re: 401k with no employer match

Post by FiveK »

afr wrote: Mon May 06, 2024 1:56 pm Wouldn’t that amount be lower since I wouldn’t be paying 24% on the entire 3k?
Why wouldn't you be?
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afr
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Re: 401k with no employer match

Post by afr »

FiveK wrote: Mon May 06, 2024 2:07 pm
afr wrote: Mon May 06, 2024 1:56 pm Wouldn’t that amount be lower since I wouldn’t be paying 24% on the entire 3k?
Why wouldn't you be?
For example; if my MAGI is 200k for 2024, I'm not taxed 24% on the entire 200k. Am I correct?
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FiveK
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Re: 401k with no employer match

Post by FiveK »

afr wrote: Mon May 06, 2024 2:21 pm
FiveK wrote: Mon May 06, 2024 2:07 pm
afr wrote: Mon May 06, 2024 1:56 pm Wouldn’t that amount be lower since I wouldn’t be paying 24% on the entire 3k?
Why wouldn't you be?
For example; if my MAGI is 200k for 2024, I'm not taxed 24% on the entire 200k. Am I correct?
That's correct, but if you go from $197K to $200K, or $200K to $203K, etc., that $3K change is taxed at the full marginal tax rate.
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afr
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Re: 401k with no employer match

Post by afr »

FiveK wrote: Mon May 06, 2024 2:31 pm
afr wrote: Mon May 06, 2024 2:21 pm
FiveK wrote: Mon May 06, 2024 2:07 pm
afr wrote: Mon May 06, 2024 1:56 pm Wouldn’t that amount be lower since I wouldn’t be paying 24% on the entire 3k?
Why wouldn't you be?
For example; if my MAGI is 200k for 2024, I'm not taxed 24% on the entire 200k. Am I correct?
That's correct, but if you go from $197K to $200K, or $200K to $203K, etc., that $3K change is taxed at the full marginal tax rate.
Wishful thinking(incorrectly) on my part. I suppose I'll just convert the extra 3-4k and take the tax hit now.
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afr
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Re: 401k with no employer match

Post by afr »

afr wrote: Mon May 06, 2024 4:17 pm
FiveK wrote: Mon May 06, 2024 2:31 pm
afr wrote: Mon May 06, 2024 2:21 pm
FiveK wrote: Mon May 06, 2024 2:07 pm
afr wrote: Mon May 06, 2024 1:56 pm Wouldn’t that amount be lower since I wouldn’t be paying 24% on the entire 3k?
Why wouldn't you be?
For example; if my MAGI is 200k for 2024, I'm not taxed 24% on the entire 200k. Am I correct?
That's correct, but if you go from $197K to $200K, or $200K to $203K, etc., that $3K change is taxed at the full marginal tax rate.
Wishful thinking(incorrectly) on my part. I suppose I'll just convert the extra 3-4k and take the tax hit now.
Is anyone aware of a limit on the number of reverse rollovers that can be made within a year?
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FiveK
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Re: 401k with no employer match

Post by FiveK »

afr wrote: Wed May 08, 2024 1:39 pm Is anyone aware of a limit on the number of reverse rollovers that can be made within a year?
No. You may have heard of a "one rollover per year" limit, but The one-per year limit does not apply to...IRA-to-[401k]plan rollovers. See that link for more.
Navillus1968
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Re: 401k with no employer match

Post by Navillus1968 »

afr wrote: Wed May 08, 2024 1:39 pm
afr wrote: Mon May 06, 2024 4:17 pm
FiveK wrote: Mon May 06, 2024 2:31 pm
afr wrote: Mon May 06, 2024 2:21 pm
FiveK wrote: Mon May 06, 2024 2:07 pm
Why wouldn't you be?
For example; if my MAGI is 200k for 2024, I'm not taxed 24% on the entire 200k. Am I correct?
That's correct, but if you go from $197K to $200K, or $200K to $203K, etc., that $3K change is taxed at the full marginal tax rate.
Wishful thinking(incorrectly) on my part. I suppose I'll just convert the extra 3-4k and take the tax hit now.
Is anyone aware of a limit on the number of reverse rollovers that can be made within a year?
As FiveK noted, the 'one rollover per year' rule pertains to like-to-like rollovers involving any flavor of Trad IRA to any other Trad IRA type or Roth IRA to Roth IRA rollovers

In other words, a TIRA to TIRA rollover invokes the rule, as does any rollover permutation thereof involving pre-tax IRAs: SEP-IRA to TIRA / SIMPLE IRA to TIRA / TIRA to SIMPLE / etc.
A Roth IRA to Roth IRA rollover also invokes the rule.

TIRA to employer plan (401k, etc) does not invoke the one per year rule because only 1 IRA is involved. Same logic applies to Roth conversions (conversions are considered rollovers by the IRS) from a TIRA, no annual limit since the IRAs are different types.

Handy IRS rollover chart- https://www.irs.gov/pub/irs-tege/rollover_chart.pdf (see footnote 2)

PS- I would rollover the $3k pre-tax to my 401k to avoid the tax hit at 24% (plus state tax), unless you think you'll be in a higher combined bracket in retirement.
placeholder
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Re: 401k with no employer match

Post by placeholder »

Navillus1968 wrote: Wed May 08, 2024 4:14 pm
As FiveK noted, the 'one rollover per year' rule pertains to like-to-like rollovers involving any flavor of Trad IRA to any other Trad IRA type or Roth IRA to Roth IRA rollovers
To clarify that only means indirect rollovers where cash was distributed to the account holder and then cash rolled into the receiving ira which could be the same one so one can transfer funds between iras using custodial transfer including checks made out to the new custodian without restriction.
Navillus1968
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Re: 401k with no employer match

Post by Navillus1968 »

placeholder wrote: Wed May 08, 2024 4:40 pm
Navillus1968 wrote: Wed May 08, 2024 4:14 pm
As FiveK noted, the 'one rollover per year' rule pertains to like-to-like rollovers involving any flavor of Trad IRA to any other Trad IRA type or Roth IRA to Roth IRA rollovers
To clarify that only means indirect rollovers where cash was distributed to the account holder and then cash rolled into the receiving ira which could be the same one so one can transfer funds between iras using custodial transfer including checks made out to the new custodian without restriction.
+1
Great point- if you tell your TIRA custodian to send you a check made out to Charles Schwab, FBO (your name here), that's considered a direct rollover (custodian to custodian) even though you physically received the check.
Since you can't cash a FBO (For Benefit Of) check, IRS doesn't count it against you as they would if you received the money via a check made out to you.
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afr
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Re: 401k with no employer match

Post by afr »

Thank you all for the clarification. Much appreciated
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afr
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Re: 401k with no employer match

Post by afr »

I recently converted the remaining basis held in the VSMGX(Vanguard Life Strategy Moderate Growth Fund) to my Roth IRA(100% VTSAX-Total Stock Market). All that shows up now in my tIRA account is the settlement fund. Can I use the settlement fund to complete future backdoor Roth transactions? As to my preferred AA of 60/40, would it be wise to sell all of the shares in VGMGX and move them to VTSAX in my Roth? My current 401k AA(and overall AA) is 60% Vanguard 500 Index Fund-Admiral and 40% American Funds US Government Sec R6. I also have a taxable account with Vanguard that is comprised of 100% stock index funds and a significantly smaller amount for emergencies in the settlement account(VMFXX). I was thinking that I'd go 100% VTSAX in my Roth and change the AA in my 401k to maintain a 60/40 AA by increasing the amount of my bond exposure. Any advice would be appreciated.
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afr
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Re: 401k with no employer match

Post by afr »

Anyone?
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FiveK
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Re: 401k with no employer match

Post by FiveK »

afr wrote: Thu May 09, 2024 7:40 am I recently converted the remaining basis held in the VSMGX(Vanguard Life Strategy Moderate Growth Fund) to my Roth IRA(100% VTSAX-Total Stock Market). All that shows up now in my tIRA account is the settlement fund. Can I use the settlement fund to complete future backdoor Roth transactions?
Because the backdoor Roth is a two-step process (1. contribute; 2. convert) the word "complete" is ambiguous. If the balance of all investments in all your non-Roth IRAs is now $0, yes you may use an existing tIRA account to receive a new non-deducted contribution and then convert from there to a Roth IRA for a "clean" backdoor Roth.

If you have any non-Roth IRAs with more than $0 balance, and that balance is pre-tax, then you may still use the backdoor process but there will be pro-rata taxation. Still completely legal and maybe even desirable, just something to be aware of.
As to my preferred AA of 60/40, would it be wise to sell all of the shares in VGMGX and move them to VTSAX in my Roth? My current 401k AA(and overall AA) is 60% Vanguard 500 Index Fund-Admiral and 40% American Funds US Government Sec R6. I also have a taxable account with Vanguard that is comprised of 100% stock index funds and a significantly smaller amount for emergencies in the settlement account(VMFXX). I was thinking that I'd go 100% VTSAX in my Roth and change the AA in my 401k to maintain a 60/40 AA by increasing the amount of my bond exposure. Any advice would be appreciated.
Wisdom might have to wait for hindsight's evaluation ;) but, consistent with Tax-efficient fund placement, your thinking is reasonable. Good luck!
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afr
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Re: 401k with no employer match

Post by afr »

My DW and I submitted IRS 8606 forms during the years we were contributing to our tIRA's, but discontinued once we stopped. A few months go I moved my tIRA basis to my RothIRA and the balance(gains) to my 401k; will I need to submit an 8606 next April when I file taxes?
toddthebod
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Re: 401k with no employer match

Post by toddthebod »

afr wrote: Sun Aug 18, 2024 12:34 pm My DW and I submitted IRS 8606 forms during the years we were contributing to our tIRA's, but discontinued once we stopped. A few months go I moved my tIRA basis to my RothIRA and the balance(gains) to my 401k; will I need to submit an 8606 next April when I file taxes?
Yes. You will receive a 1099-R for the Roth conversion, and the form 8606 is what will tell the IRS that it was tax free.
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afr
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Re: 401k with no employer match

Post by afr »

toddthebod wrote: Sun Aug 18, 2024 12:36 pm
afr wrote: Sun Aug 18, 2024 12:34 pm My DW and I submitted IRS 8606 forms during the years we were contributing to our tIRA's, but discontinued once we stopped. A few months go I moved my tIRA basis to my RothIRA and the balance(gains) to my 401k; will I need to submit an 8606 next April when I file taxes?
Yes. You will receive a 1099-R for the Roth conversion, and the form 8606 is what will tell the IRS that it was tax free.
Thanks
chassis
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Re: 401k with no employer match

Post by chassis »

afr wrote: Thu Apr 25, 2024 8:57 am
chassis wrote: Tue Apr 23, 2024 6:36 am
afr wrote: Sun Dec 25, 2022 10:34 am Hi all and Merry Christmas,

I'm currently 62 y.o. and I've been maxing out my unmatched 401k for the past 16 years, but have never added the 50 and over catch-up contributions. My wife(no 401k) and I file MFJ and are in the 24% fed tax bracket. We each have tIRA's(plus old Roth accounts), a joint taxable account and I-bonds. I anticipate being in the current 12% tax bracket when I plan on retiring in 4 yrs. We have discontinued contributions to the tIRA's and limit our contributions to the joint taxable account, I-bonds and HYSA. We plan on doing gradual Roth conversions when we retire. Since the withdrawals from my 401k will be taxed at regular income tax rates and the fact that I have no employer match, does it make to continue with no catch-up contributions?

Thank You
I would contribute to taxable in your situation and not to tIRA or Roth.
chassis,
Any particular reason why taxable over Roth?
I see no reason to use an investment vehicle, such as a Roth, with reduced liquidity. Tax deferral at age ~60 and beyond is inconsequential, monetarily speaking.

You can do a math problem if you like.

How many years do you expect to contribute to the Roth?
What would the expected tax-deferred earnings be?
When would you expect to withdraw the tax-deferred earnings?
What would be the present value of the difference of future taxes at withdrawal, compared with contributing to a taxable account over the years?

My guess is the answer is: a small number. The juice (paltry future tax savings) isn't worth the squeeze (reduced liquidity).
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afr
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Re: 401k with no employer match

Post by afr »

chassis wrote: Mon Aug 19, 2024 7:46 pm
afr wrote: Thu Apr 25, 2024 8:57 am
chassis,
Any particular reason why taxable over Roth?
I see no reason to use an investment vehicle, such as a Roth, with reduced liquidity. Tax deferral at age ~60 and beyond is inconsequential, monetarily speaking.

You can do a math problem if you like.

How many years do you expect to contribute to the Roth?
What would the expected tax-deferred earnings be?
When would you expect to withdraw the tax-deferred earnings?
What would be the present value of the difference of future taxes at withdrawal, compared with contributing to a taxable account over the years?

My guess is the answer is: a small number. The juice (paltry future tax savings) isn't worth the squeeze (reduced liquidity).
chassis,
That may very well be the case. However, at least the almost $83,600 that I was able to convert to my Roth IRA won't be taxed a 2nd time. That's worth something to me. And a Merry Christmas and Happy New Year to all.
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afr
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Re: 401k with no employer match

Post by afr »

toddthebod wrote: Sun Aug 18, 2024 12:36 pm
afr wrote: Sun Aug 18, 2024 12:34 pm My DW and I submitted IRS 8606 forms during the years we were contributing to our tIRA's, but discontinued once we stopped. A few months go I moved my tIRA basis to my RothIRA and the balance(gains) to my 401k; will I need to submit an 8606 next April when I file taxes?
Yes. You will receive a 1099-R for the Roth conversion, and the form 8606 is what will tell the IRS that it was tax free.
I just received two separate form 1099-R's for 2024 from Vanguard. The first shows a gross distribution of $83,555.86(my last reported basis was $80,000 in 2021 when I made my final contribution to my tIRA) and a taxable amount of $83,556.86(which was the amount I converted to my RothIRA in May 2024), and a distribution code 7(normal distribution). The second 1099-R shows a gross distribution of $101,058.22(the amount I reverse rolled over to my 401k) and a taxable amount of $0, and distribution code G(direct rollover of a distribution to a qualified plan). Does this seem correct? I'm assuming I'll simply have my accountant complete the 2024 form 8606.
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afr
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Re: 401k with no employer match

Post by afr »

afr wrote: Mon Jan 20, 2025 2:27 pm
toddthebod wrote: Sun Aug 18, 2024 12:36 pm

Yes. You will receive a 1099-R for the Roth conversion, and the form 8606 is what will tell the IRS that it was tax free.
I just received two separate form 1099-R's for 2024 from Vanguard. The first shows a gross distribution of $83,555.86(my last reported basis was $80,000 in 2021 when I made my final contribution to my tIRA) and a taxable amount of $83,556.86(which was the amount I converted to my RothIRA in May 2024), and a distribution code 7(normal distribution). The second 1099-R shows a gross distribution of $101,058.22(the amount I reverse rolled over to my 401k) and a taxable amount of $0, and distribution code G(direct rollover of a distribution to a qualified plan). Does this seem correct? I'm assuming I'll simply have my accountant complete the 2024 form 8606.
bump
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afr
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Re: 401k with no employer match

Post by afr »

afr wrote: Mon Jan 20, 2025 4:41 pm
afr wrote: Mon Jan 20, 2025 2:27 pm

I just received two separate form 1099-R's for 2024 from Vanguard. The first shows a gross distribution of $83,555.86(my last reported basis was $80,000 in 2021 when I made my final contribution to my tIRA) and a taxable amount of $83,556.86(which was the amount I converted to my RothIRA in May 2024), and a distribution code 7(normal distribution). The second 1099-R shows a gross distribution of $101,058.22(the amount I reverse rolled over to my 401k) and a taxable amount of $0, and distribution code G(direct rollover of a distribution to a qualified plan). Does this seem correct? I'm assuming I'll simply have my accountant complete the 2024 form 8606.
bump
Anyone?
Silk McCue
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Re: 401k with no employer match

Post by Silk McCue »

Yes it looks correct. What are you questioning about this since it lines up with what actually happened? Discuss it with your accountant when you provide your tax info.

Cheers
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afr
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Re: 401k with no employer match

Post by afr »

Silk McCue wrote: Tue Jan 21, 2025 7:53 am Yes it looks correct. What are you questioning about this since it lines up with what actually happened? Discuss it with your accountant when you provide your tax info.

Cheers
Thanks for your reply. I’m really just asking that the only thing I’ll have to pay taxes on is the extra $3556 in gains over my basis of 80k
HomeStretch
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Re: 401k with no employer match

Post by HomeStretch »

Yes, you should only be taxed on the $3,556.86. Be sure to clearly explain what you did to your tax preparer in addition to giving them the Form 1099-Rs to properly reflect these on Form 1040/8606.
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afr
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Re: 401k with no employer match

Post by afr »

HomeStretch wrote: Tue Jan 21, 2025 8:22 am Yes, you should only be taxed on the $3,556.86. Be sure to clearly explain what you did to your tax preparer in addition to giving them the Form 1099-Rs to properly reflect these on Form 1040/8606.
Thanks for your you very much for your help.
Silk McCue
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Re: 401k with no employer match

Post by Silk McCue »

I’m confused and I haven’t reviewed the history of this post. Why isn’t the full tIRA conversion to Roth taxable?

Cheers
HomeStretch
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Re: 401k with no employer match

Post by HomeStretch »

afr wrote: Tue Jan 21, 2025 8:29 am
HomeStretch wrote: Tue Jan 21, 2025 8:22 am Yes, you should only be taxed on the $3,556.86. Be sure to clearly explain what you did to your tax preparer in addition to giving them the Form 1099-Rs to properly reflect these on Form 1040/8606.
Thanks for your you very much for your help.
You are welcome. Check your tax return draft when you get it just be sure your tax preparer has correctly reflected everything. Form 1040 line 4 will show the full IRA distribution (4a) and the taxable amount of $3,556.86 (4b) with the word “rollover” next to it. Review Form 8606 too.
HomeStretch
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Re: 401k with no employer match

Post by HomeStretch »

Silk McCue wrote: Tue Jan 21, 2025 8:32 am I’m confused and I haven’t reviewed the history of this post. Why isn’t the full tIRA conversion to Roth taxable?

Cheers
OP has an $80k TIRA basis.
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Re: 401k with no employer match

Post by afr »

HomeStretch wrote: Tue Jan 21, 2025 8:34 am
afr wrote: Tue Jan 21, 2025 8:29 am

Thanks for your you very much for your help.
You are welcome. Check your tax return draft when you get it just be sure your tax preparer has correctly reflected everything. Form 1040 line 4 will show the full IRA distribution (4a) and the taxable amount of $3,556.86 (4b) with the word “rollover” next to it. Review Form 8606 too.
What section/s should be completed on form 8606?
Topic Author
afr
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Re: 401k with no employer match

Post by afr »

HomeStretch wrote: Tue Jan 21, 2025 8:22 am Yes, you should only be taxed on the $3,556.86. Be sure to clearly explain what you did to your tax preparer in addition to giving them the Form 1099-Rs to properly reflect these on Form 1040/8606.
HomeStretch, thanks for your reply. I'm not sure why I'd have to file a form 8606 for 2024. The instructions state that it only needs to be filed if I made a nondeductible contribution(which I haven't) or took a distribution(which I technically didn't since I only completed a reverse rollover to my 401k).
Navillus1968
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Re: 401k with no employer match

Post by Navillus1968 »

afr wrote: Thu Jan 23, 2025 1:01 pm
HomeStretch wrote: Tue Jan 21, 2025 8:22 am Yes, you should only be taxed on the $3,556.86. Be sure to clearly explain what you did to your tax preparer in addition to giving them the Form 1099-Rs to properly reflect these on Form 1040/8606.
HomeStretch, thanks for your reply. I'm not sure why I'd have to file a form 8606 for 2024. The instructions state that it only needs to be filed if I made a nondeductible contribution(which I haven't) or took a distribution(which I technically didn't since I only completed a reverse rollover to my 401k).
afr wrote: Mon Jan 20, 2025 2:27 pm I just received two separate form 1099-R's for 2024 from Vanguard. The first shows a gross distribution of $83,555.86(my last reported basis was $80,000 in 2021 when I made my final contribution to my tIRA) and a taxable amount of $83,556.86 (which was the amount I converted to my Roth IRA in May 2024), and a distribution code 7(normal distribution)
Form 8606 Part II is titled "2024 Conversions From Traditional, Traditional SEP, or Traditional SIMPLE IRAs to Roth, Roth SEP, or
Roth SIMPLE IRAs"
If you did a Roth conversion in May 2024, F8606 is how you determine the taxable amount of your Roth conversion. A Roth IRA conversion involves a distribution of TIRA money by definition, which is why you received a 1099-R.
Without the F8606 to account for post-tax basis, the IRS would assume the entire conversion was pre-tax money & your tax bill would be hefty.
Topic Author
afr
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Re: 401k with no employer match

Post by afr »

Navillus1968 wrote: Thu Jan 23, 2025 7:40 pm
afr wrote: Thu Jan 23, 2025 1:01 pm

HomeStretch, thanks for your reply. I'm not sure why I'd have to file a form 8606 for 2024. The instructions state that it only needs to be filed if I made a nondeductible contribution(which I haven't) or took a distribution(which I technically didn't since I only completed a reverse rollover to my 401k).
afr wrote: Mon Jan 20, 2025 2:27 pm I just received two separate form 1099-R's for 2024 from Vanguard. The first shows a gross distribution of $83,555.86(my last reported basis was $80,000 in 2021 when I made my final contribution to my tIRA) and a taxable amount of $83,556.86 (which was the amount I converted to my Roth IRA in May 2024), and a distribution code 7(normal distribution)
Form 8606 Part II is titled "2024 Conversions From Traditional, Traditional SEP, or Traditional SIMPLE IRAs to Roth, Roth SEP, or
Roth SIMPLE IRAs"
If you did a Roth conversion in May 2024, F8606 is how you determine the taxable amount of your Roth conversion. A Roth IRA conversion involves a distribution of TIRA money by definition, which is why you received a 1099-R.
Without the F8606 to account for post-tax basis, the IRS would assume the entire conversion was pre-tax money & your tax bill would be hefty.
Navillus1968,
Thanks for your reply. Would I be correct that only Part II would need be completed on F8606?
Navillus1968
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Joined: Mon Feb 22, 2021 5:00 pm
Location: FL Tampa Bay

Re: 401k with no employer match

Post by Navillus1968 »

afr wrote: Wed Jan 29, 2025 12:43 pm
Navillus1968 wrote: Thu Jan 23, 2025 7:40 pm



Form 8606 Part II is titled "2024 Conversions From Traditional, Traditional SEP, or Traditional SIMPLE IRAs to Roth, Roth SEP, or
Roth SIMPLE IRAs"
If you did a Roth conversion in May 2024, F8606 is how you determine the taxable amount of your Roth conversion. A Roth IRA conversion involves a distribution of TIRA money by definition, which is why you received a 1099-R.
Without the F8606 to account for post-tax basis, the IRS would assume the entire conversion was pre-tax money & your tax bill would be hefty.
Navillus1968,
Thanks for your reply. Would I be correct that only Part II would need be completed on F8606?
Part II has math that depends on the info you entered in Part I, so you need to fill out both parts. Here's an excellent tutorial on backdoor Roth & Form 8606. Bookmark it!
https://www.whitecoatinvestor.com/backd ... ial/#steps

There's even a tutorial on doing the BDR at various brokerages & how to report it in Turbotax.
Topic Author
afr
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Re: 401k with no employer match

Post by afr »

Navillus1968 wrote: Wed Jan 29, 2025 6:13 pm
afr wrote: Wed Jan 29, 2025 12:43 pm

Navillus1968,
Thanks for your reply. Would I be correct that only Part II would need be completed on F8606?
Part II has math that depends on the info you entered in Part I, so you need to fill out both parts. Here's an excellent tutorial on backdoor Roth & Form 8606. Bookmark it!
https://www.whitecoatinvestor.com/backd ... ial/#steps

There's even a tutorial on doing the BDR at various brokerages & how to report it in Turbotax.
Thanks
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Re: 401k with no employer match

Post by Pops1860 »

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