Backdoor Roth IRA Conversion
Backdoor Roth IRA Conversion
Hi Bogleheads!
Great forum! I've been lurking for awhile and I'm impressed with the knowledge and helpfulness of so many of you! I'd thought I'd ask some advice on what to do regarding the subject line.
I currently have an account with Personal Capital Wealth Management (yes I know, I'd like to move this but that's for another post). My personal advisor recommended that I do a "backdoor Roth IRA conversion", where I contribute a nondeductible 6K to my traditional IRA and immediately convert this to a Roth IRA. The issue is that I already have about 86K of pre-tax dollars (I think they are pre-tax dollars, I haven't contributed to this in years -- will confirm), and so adding 6K would intermingle pre-tax and after-tax dollars, triggering taxes pro rata (the 'cream in the coffee rule').
This got me thinking that perhaps I could roll this traditional IRA into my employer-sponsored 401k and then make the non-deductible 6K, effectively avoiding the 'coffee in the cup rule'. Turns out, my employer does allow this. I approached my financial advisor about this and she was a little taken aback that this could be done. She discussed this with her colleagues and recommended that I talk to my CPA about this because this could be considered "stacking" by the IRS, where a series of steps while taken independently and arbitrary seem legal, taken together exhibit a goal to avoid taxes. I'm not sure if she's saying this as pure advice or if there's an ulterior motive to keep the funds with PC -- I imagine it's a little bit of both even though she's a fiduciary.
Anyway, since I don't have a CPA (TurboTax for the win!), I cold called a CPA in the area and explained the issue. She didn't like the idea and wasn't even aware that some 401(k)s do accept roll-ins of IRAs. So I'm not sure if this advice is sound.
So here are my questions:
1. Is what I'm describing legitimate? If all the things I said are correct (the traditional IRA is solely filled with before-tax dollars, my 401k will accept IRAs), could this trigger an issue with the IRS?. But I'm effectively describing what is talked about here, under "Mistake 2: Not Taking Advantage of the Escape Hatch": https://www.morningstar.com/articles/68 ... 6-mistakes
2. Are there issues that I'm not considering or overlooking?
3. If this scenario is sketchy, should I a) just bite the bullet and convert the entire traditional IRA into a Roth IRA and pay the taxes on the whole thing up front, b) contribute 6K and pay taxes pro rata, or c) do nothing.
I'm also 43 and ideally I'd optimally like to retire within 10-15 years if I can swing it. But I'd definitely will like to retire by the time I'm 60.
Regardless, I think I'd like to move the IRA over to my 401k because I'm paying 0.89% AUM whereas expense ratios in my 401k are around 0.04- 0.1%
Thanks for your time.
Great forum! I've been lurking for awhile and I'm impressed with the knowledge and helpfulness of so many of you! I'd thought I'd ask some advice on what to do regarding the subject line.
I currently have an account with Personal Capital Wealth Management (yes I know, I'd like to move this but that's for another post). My personal advisor recommended that I do a "backdoor Roth IRA conversion", where I contribute a nondeductible 6K to my traditional IRA and immediately convert this to a Roth IRA. The issue is that I already have about 86K of pre-tax dollars (I think they are pre-tax dollars, I haven't contributed to this in years -- will confirm), and so adding 6K would intermingle pre-tax and after-tax dollars, triggering taxes pro rata (the 'cream in the coffee rule').
This got me thinking that perhaps I could roll this traditional IRA into my employer-sponsored 401k and then make the non-deductible 6K, effectively avoiding the 'coffee in the cup rule'. Turns out, my employer does allow this. I approached my financial advisor about this and she was a little taken aback that this could be done. She discussed this with her colleagues and recommended that I talk to my CPA about this because this could be considered "stacking" by the IRS, where a series of steps while taken independently and arbitrary seem legal, taken together exhibit a goal to avoid taxes. I'm not sure if she's saying this as pure advice or if there's an ulterior motive to keep the funds with PC -- I imagine it's a little bit of both even though she's a fiduciary.
Anyway, since I don't have a CPA (TurboTax for the win!), I cold called a CPA in the area and explained the issue. She didn't like the idea and wasn't even aware that some 401(k)s do accept roll-ins of IRAs. So I'm not sure if this advice is sound.
So here are my questions:
1. Is what I'm describing legitimate? If all the things I said are correct (the traditional IRA is solely filled with before-tax dollars, my 401k will accept IRAs), could this trigger an issue with the IRS?. But I'm effectively describing what is talked about here, under "Mistake 2: Not Taking Advantage of the Escape Hatch": https://www.morningstar.com/articles/68 ... 6-mistakes
2. Are there issues that I'm not considering or overlooking?
3. If this scenario is sketchy, should I a) just bite the bullet and convert the entire traditional IRA into a Roth IRA and pay the taxes on the whole thing up front, b) contribute 6K and pay taxes pro rata, or c) do nothing.
I'm also 43 and ideally I'd optimally like to retire within 10-15 years if I can swing it. But I'd definitely will like to retire by the time I'm 60.
Regardless, I think I'd like to move the IRA over to my 401k because I'm paying 0.89% AUM whereas expense ratios in my 401k are around 0.04- 0.1%
Thanks for your time.
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Re: Backdoor Roth IRA Conversion
Welcome to Bogleheads!
There is absolutely nothing sketchy or improper in rolling your entire IRA balance into an employer plan. That must be done before 12/31 of this year to avoid the pro-rata rule coming into play with a Backdoor Roth. Doing both a rollover and Backdoor Roth in the same year is not an issue or concern for the IRS.
This process is a well worn topic on this site and an important strategy for many.
Here is a Wiki on the Backdoor Roth.
https://www.bogleheads.org/wiki/Backdoor_Roth
Never heard of “stacking” but am aware of step transactions, which those you have spoken to appear to be referring to, that can run afoul with the IRS. The steps described in your scenario are in no way a step transaction. You are good to go based on what you described.
Cheers
There is absolutely nothing sketchy or improper in rolling your entire IRA balance into an employer plan. That must be done before 12/31 of this year to avoid the pro-rata rule coming into play with a Backdoor Roth. Doing both a rollover and Backdoor Roth in the same year is not an issue or concern for the IRS.
This process is a well worn topic on this site and an important strategy for many.
Here is a Wiki on the Backdoor Roth.
https://www.bogleheads.org/wiki/Backdoor_Roth
Never heard of “stacking” but am aware of step transactions, which those you have spoken to appear to be referring to, that can run afoul with the IRS. The steps described in your scenario are in no way a step transaction. You are good to go based on what you described.
Cheers
Re: Backdoor Roth IRA Conversion
Regarding legitimacy of the backdoor Roth, there was a recent thread that asked this, and several of the early replies pointed out (with references) that the IRS and Congress acknowledged this in 2017.
Re: Backdoor Roth IRA Conversion
Does your employer not offer a Roth contribution option? Couldn't you just use that rather than convert?
Re: Backdoor Roth IRA Conversion
There was an IRS rep a few years ago who acknowledged the strategy.
There is also some proposed legislature that even references it by this unofficial "backdoor" pseudonym terminology.
Note to the mods: I am not trying to discuss proposed legislature, simply using it as a reference point that the government knows and acknowledges this strategy
There is also some proposed legislature that even references it by this unofficial "backdoor" pseudonym terminology.
Note to the mods: I am not trying to discuss proposed legislature, simply using it as a reference point that the government knows and acknowledges this strategy
Re: Backdoor Roth IRA Conversion
+1Silk McCue wrote: ↑Tue Oct 26, 2021 8:22 pm Welcome to Bogleheads!
There is absolutely nothing sketchy or improper in rolling your entire IRA balance into an employer plan. That must be done before 12/31 of this year to avoid the pro-rata rule coming into play with a Backdoor Roth. Doing both a rollover and Backdoor Roth in the same year is not an issue or concern for the IRS.
This process is a well worn topic on this site and an important strategy for many.
Here is a Wiki on the Backdoor Roth.
https://www.bogleheads.org/wiki/Backdoor_Roth
Never heard of “stacking” but am aware of step transactions, which those you have spoken to appear to be referring to, that can run afoul with the IRS. The steps described in your scenario are in no way a step transaction. You are good to go based on what you described.
Cheers
Totally agree. DW and I rolled existing IRA's into employer 401(k)'s and then performed backdoor Roth. As you stated, just need to make sure existing IRA balances are moved by 12/31 of the year in which the backdoor Roth will be executed.
I had heard of stacking. Here is a description I was able to find. Not saying this is correct, or that I agree with it, just providing for information purposes.
Avoid Employer Limitations by Stacking
Under IRS tax code, employee contributions (elective deferrals) are subject to an individual limit of $18,000, across any retirement plans in which the employee participates. However, maximum contribution limits (IRC 415(c)) are PER employer, not an aggregated total across all retirement plans. This opens up the possibility to use the employer portion across accounts, to exceed the limits imposed by any given plan.
Re: Backdoor Roth IRA Conversion
The fact that your advisor recommended a backdoor Roth with 86k in a traditional ira reveals how incompetent she is. Get out of there asap.
Additionally, not knowing you could roll a trad ira into a 401k confirms it.
Additionally, not knowing you could roll a trad ira into a 401k confirms it.
Re: Backdoor Roth IRA Conversion
+1.
Also, OP, can you clarify that you understand WHY a backdoor Roth contribution is necessary? This is typically done when one is above the phaseout limit, which is pretty high. As employer plans have no income limitations for direct Roth contributions, this is a better and easier way to get money into Roth.
Re: Backdoor Roth IRA Conversion
Clearly not the advisor's area of expertise . Find another or do it yourself with our help here.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect
Re: Backdoor Roth IRA Conversion
To be fair, it was the CPA who hadn't heard of rolling an IRA into a 401k. Regardless, I don't think my financial advisor is providing much value. I'd like to get out of this, but I'll leave that for another post.
Re: Backdoor Roth IRA Conversion
As far as I understand it, my salary is above the limitations for a Roth IRA.Admiral wrote: ↑Wed Oct 27, 2021 9:46 am+1.
Also, OP, can you clarify that you understand WHY a backdoor Roth contribution is necessary? This is typically done when one is above the phaseout limit, which is pretty high. As employer plans have no income limitations for direct Roth contributions, this is a better and easier way to get money into Roth.
Re: Backdoor Roth IRA Conversion
Thank you for this thread, it was very informative. Although I don't mean to rehash the debate from that thread, I have some takeaways:w5000 wrote: ↑Tue Oct 26, 2021 9:05 pm Regarding legitimacy of the backdoor Roth, there was a recent thread that asked this, and several of the early replies pointed out (with references) that the IRS and Congress acknowledged this in 2017.
1. Backdoor Roth IRA contributions are common among Bogleheads and in the FIRE community.
2. There seems to be some debate regarding the legality of this move. There doesn't seem to be an explicit law indicating it is illegal, though some may indicate the IRS could use the step transaction doctrine to indicate that intent was there to get around the Roth IRA salary limitations. Congress acknowledged the existence of the Backdoor Roth IRA Conversion in the 2017 TCJA Act, though this was in a Congressional report and not in a statute, so this is not legally binding. There seems to be no public record of the IRS targeting someone for doing this transaction.
3. There is current legislation pending in Congress that would do away with the Backdoor Roth IRA Conversion. If passed, Backdoor Roth's cannot be done after 12/31 of this year.
Based on this, at the very least I want to move my IRA out of this brokerage and into my employer's 401k. Secondly, I'm considering contacting another CPA to get a second (or third?) opinion on this before making any additional decisions.
On another note, I have a brokerage account with Personal Capital Wealth Management (not just using the free tool). I'm looking to get out of this but I'm concerned about tax implications (it's a roboadvisor that balances the portfolio based on industrial sectors). I already have a brokerage account with Vanguard and I'd rather move the funds to 1-2 ETFs. I'm not soliciting advice on this, but I'd thought I would just mention. I'll make a more detailed post using the template shortly.
Thanks for your time and help. This is much appreciated.
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Re: Backdoor Roth IRA Conversion
Do as you wish but folks here know that they are talking about. The Backdoor Roth is absolutely legal. You’ve already been given bad advice from those you rely on to give you accurate information which brought you here.
Cheers
Re: Backdoor Roth IRA Conversion
You have not answered my question: Does your employer plan allow a Roth contribution? If so, then why do you wish to use the backdoor in your IRA? There is no salary limit for Roth contributions in workplace plans.bmy78 wrote: ↑Wed Oct 27, 2021 12:36 pmAs far as I understand it, my salary is above the limitations for a Roth IRA.Admiral wrote: ↑Wed Oct 27, 2021 9:46 am+1.
Also, OP, can you clarify that you understand WHY a backdoor Roth contribution is necessary? This is typically done when one is above the phaseout limit, which is pretty high. As employer plans have no income limitations for direct Roth contributions, this is a better and easier way to get money into Roth.
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Re: Backdoor Roth IRA Conversion
IRA contributions are in addition to 401k deferrals so a good reason to use backdoor is to add more into tax advantaged plus if one is unable to use roth ira then it's likely that roth 401k is not a good idea because deferral would be a better tax situation.
Re: Backdoor Roth IRA Conversion
Please explain. This makes no sense. I am well above the phaseout and cannot contribute directly to a Roth IRA. I choose to contribute to both my Traditional workplace plan AND the Roth option in that plan. Deferral is not "a better tax situation" by any means. Both are good options.placeholder wrote: ↑Wed Oct 27, 2021 6:13 pmIRA contributions are in addition to 401k deferrals so a good reason to use backdoor is to add more into tax advantaged plus if one is unable to use roth ira then it's likely that roth 401k is not a good idea because deferral would be a better tax situation.
I HAVE used the backdoor but I did not face a pro-rata issue like the OP.
Re: Backdoor Roth IRA Conversion
I will have to confirm this, but my employer offers either a 401k OR a Roth 401k — not both. If they did that would solve this issue and I thank you for highlighting it. I’m already maxing out my traditional 401k.
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Re: Backdoor Roth IRA Conversion
1. The limit in a 401k includes both roth and traditional (deferral) contributions so you can't do more than 19.5k so doing backdoor roth increases the total going into tax advantaged accounts.Admiral wrote: ↑Wed Oct 27, 2021 6:17 pm Please explain. This makes no sense. I am well above the phaseout and cannot contribute directly to a Roth IRA. I choose to contribute to both my Traditional workplace plan AND the Roth option in that plan. Deferral is not "a better tax situation" by any means. Both are good options.
2. In a higher tax bracket which someone phased out of direct roth ira is likely in is generally served better by pretax contributions in the 401k.
Re: Backdoor Roth IRA Conversion
Just confirmed that my employer plan does not allow Roth conversions. I can however contribute to both traditional and Roth 401ks but the sum total of both cannot exceed 19.5K, which doesn’t help my situation.
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Re: Backdoor Roth IRA Conversion
That's true for everyone as the law restricts the combination to 19.5k (plus applicable catch up).
Re: Backdoor Roth IRA Conversion
Keep in mind that Roth savings are more valuable, dollar for dollar, than pre-tax.bmy78 wrote: ↑Wed Oct 27, 2021 9:57 pmJust confirmed that my employer plan does not allow Roth conversions. I can however contribute to both traditional and Roth 401ks but the sum total of both cannot exceed 19.5K, which doesn’t help my situation.
But yes, if you are set on a Roth IRA contribution you will need to roll the T-IRA funds into your workplace plan, if they allow it, or pay tax. Taxable is also an option, of course.
Re: Backdoor Roth IRA Conversion
Alternatively, I could not "roll-in" my tIRA into my employer's 401k plan, do the Roth conversion and pay the tax now and upfront. I'm not sure what the cost basis is worst-case scenario 15% on 86K is ~$12.9K. However I would have ~92K in a Roth IRA that is completely tax-free. The more I think about, that seems really attractive, especially if the conversion may not be available in the years ahead.
Moving the tIRA to my 401k just defers the taxes later, and as I understand it, that's all taxed under ordinary income instead of capital gains. So while my marginal tax rate may be lower when I'm of retirement age, I could have greater control of my tax rate if I can withdrawal from funds that are not taxable, i.e. a Roth IRA that has tax-free dollars. If I roll-in the tIRA into my 401k, and do the Roth conversion, I'd only have 6K tax-free in that account instead of ~92K.
Doing the direct conversion without the roll-in seems more attractive the more I think about it. Thoughts?
Moving the tIRA to my 401k just defers the taxes later, and as I understand it, that's all taxed under ordinary income instead of capital gains. So while my marginal tax rate may be lower when I'm of retirement age, I could have greater control of my tax rate if I can withdrawal from funds that are not taxable, i.e. a Roth IRA that has tax-free dollars. If I roll-in the tIRA into my 401k, and do the Roth conversion, I'd only have 6K tax-free in that account instead of ~92K.
Doing the direct conversion without the roll-in seems more attractive the more I think about it. Thoughts?
Re: Backdoor Roth IRA Conversion
Why do you think that converting the 86K to Roth would be taxed at 15%?bmy78 wrote: ↑Thu Oct 28, 2021 9:30 am Alternatively, I could not "roll-in" my tIRA into my employer's 401k plan, do the Roth conversion and pay the tax now and upfront. I'm not sure what the cost basis is worst-case scenario 15% on 86K is ~$12.9K. [ . . .]
Moving the tIRA to my 401k just defers the taxes later, and as I understand it, that's all taxed under ordinary income instead of capital gains. [ . . .]
A conversion is taxed at your marginal tax rate for ordinary income. (It is worrying me that you said 15% (which happens to be the long term capital gain rate) and then mentioned capital gains a few sentences later. A conversion from tIRA to Roth IRA is *not* taxed at long term capital gain tax rates.)
Re: Backdoor Roth IRA Conversion
Okay, that was my misunderstanding. I assumed it would fall under long term capital gains rates but I was incorrect. That changes the equation quite a bit. Thank you for clarifying.cas wrote: ↑Thu Oct 28, 2021 9:45 amWhy do you think that converting the 86K to Roth would be taxed at 15%?bmy78 wrote: ↑Thu Oct 28, 2021 9:30 am Alternatively, I could not "roll-in" my tIRA into my employer's 401k plan, do the Roth conversion and pay the tax now and upfront. I'm not sure what the cost basis is worst-case scenario 15% on 86K is ~$12.9K. [ . . .]
Moving the tIRA to my 401k just defers the taxes later, and as I understand it, that's all taxed under ordinary income instead of capital gains. [ . . .]
A conversion is taxed at your marginal tax rate for ordinary income. (It is worrying me that you said 15% (which happens to be the long term capital gain rate) and then mentioned capital gains a few sentences later. A conversion from tIRA to Roth IRA is *not* taxed at long term capital gain tax rates.)
Re: Backdoor Roth IRA Conversion
Let me step back a bit and look at the numbers differently.bmy78 wrote: ↑Thu Oct 28, 2021 9:48 amOkay, that was my misunderstanding. I assumed it would fall under long term capital gains rates but I was incorrect. That changes the equation quite a bit. Thank you for clarifying.cas wrote: ↑Thu Oct 28, 2021 9:45 amWhy do you think that converting the 86K to Roth would be taxed at 15%?bmy78 wrote: ↑Thu Oct 28, 2021 9:30 am Alternatively, I could not "roll-in" my tIRA into my employer's 401k plan, do the Roth conversion and pay the tax now and upfront. I'm not sure what the cost basis is worst-case scenario 15% on 86K is ~$12.9K. [ . . .]
Moving the tIRA to my 401k just defers the taxes later, and as I understand it, that's all taxed under ordinary income instead of capital gains. [ . . .]
A conversion is taxed at your marginal tax rate for ordinary income. (It is worrying me that you said 15% (which happens to be the long term capital gain rate) and then mentioned capital gains a few sentences later. A conversion from tIRA to Roth IRA is *not* taxed at long term capital gain tax rates.)
I have 86K in a traditional IRA. If I contribute 6K and convert it into a Roth IRA, I now have a Roth IRA that has 92K in it, 86K of which is taxable as ordinary income and is due this year. My household marginal tax rate was 35% last year and I expect it to be the same this year. As I understand it, that means I will owe ~$31K in taxes this year on this IRA if I convert it.
However, according to today's tax code from that point onward all of that 92K is tax-free. And as I understand it, all of the gains within that Roth IRA are also tax-free, so long as I don't withdrawal before 59.5 and it's held for 5+ years. That means that it can grow and anything in it is not considered taxable.
So, if I do a rough calculation using a compound interest calculator, I can calculate estimated returns for the next ~16.5 years. I'm 43 and if I understand the Roth IRA rules correctly, withdrawals are not taxable so long as I'm over 59.5 and the holding period is at least 5 years. So let's assume an 8% return (feel free to let me know if my assumptions are out of whack) and I don't contribute anything more, I'm at about $315K tax-free after 16.5 years. So if I take my initial tax liability on this (35% of 85K is ~31K) and divide it by $315K, I've paid 31K of 315K, which is a rate of 9.8%. I know I'm going to be in a lower tax bracket when I retire, but I'm not going to be that low! So it seems that even with the 31K hit now, I'm still up ahead considerably, assuming the laws remain the same and my back-of-the-napkin calculations are somewhat accurate.
Am I missing something here? Why wouldn't I not do this, other than the upfront tax liability cost?
Re: Backdoor Roth IRA Conversion
You'll want to do this calculation to see that marginal tax rate for conversion now vs marginal tax rate for withdrawal(or conversion) later is the relevant measurement: Boglehead's wiki Traditional vs Roth - Calculations - Simplest Situationbmy78 wrote: ↑Thu Oct 28, 2021 12:21 pm So if I take my initial tax liability on this (35% of 85K is ~30K) and divide it by $315K, I've paid 31K of 315K, which is a rate of 9.8%. I know I'm going to be in a lower tax bracket when I retire, but I'm not going to be that low! So it seems that even with the 31K hit now, I'm still up ahead considerably, assuming the laws remain the same and my back-of-the-napkin calculations are somewhat accurate.
Am I missing something here? Why wouldn't I not do this, other than the upfront tax liability cost?
Then see: Boglehead's wiki Traditional vs Roth - Common Misconceptions - "Misconception: it's better to pay tax on the seed than the harvest."
Re: Backdoor Roth IRA Conversion
This is a very common and routine situation. Just move your IRA to your 401K, do the backdoor Roth, and be done with it. There's no reason to talk to 1 or more additional CPAs --> especially because the first one you talked to was clueless.
If you're lucky, moving the IRA to your employer 401K won't be a PITA and can be done electronically. Just make sure both moves are completed before 12/31
If you're lucky, moving the IRA to your employer 401K won't be a PITA and can be done electronically. Just make sure both moves are completed before 12/31
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Re: Backdoor Roth IRA Conversion
The mathematical error here is that you did not calculate what the value would be of the 31k you are paying in taxes today if it had similar growth. Due to the commutative property of multiplication, it does not matter if you pay taxes now or later if the tax rate is the same. However, you win by paying taxes later if you expect your tax rate to be lower in the future (as is often the case for retirees). Thus, particularly for those in a high tax bracket today, tax-deferred is preferable and a Roth conversion of pre-tax dollars would not be recommended.bmy78 wrote: ↑Thu Oct 28, 2021 12:21 pm Let me step back a bit and look at the numbers differently.
I have 86K in a traditional IRA. If I contribute 6K and convert it into a Roth IRA, I now have a Roth IRA that has 92K in it, 86K of which is taxable as ordinary income and is due this year. My household marginal tax rate was 35% last year and I expect it to be the same this year. As I understand it, that means I will owe ~$31K in taxes this year on this IRA if I convert it.
However, according to today's tax code from that point onward all of that 92K is tax-free. And as I understand it, all of the gains within that Roth IRA are also tax-free, so long as I don't withdrawal before 59.5 and it's held for 5+ years. That means that it can grow and anything in it is not considered taxable.
So, if I do a rough calculation using a compound interest calculator, I can calculate estimated returns for the next ~16.5 years. I'm 43 and if I understand the Roth IRA rules correctly, withdrawals are not taxable so long as I'm over 59.5 and the holding period is at least 5 years. So let's assume an 8% return (feel free to let me know if my assumptions are out of whack) and I don't contribute anything more, I'm at about $315K tax-free after 16.5 years. So if I take my initial tax liability on this (35% of 85K is ~31K) and divide it by $315K, I've paid 31K of 315K, which is a rate of 9.8%. I know I'm going to be in a lower tax bracket when I retire, but I'm not going to be that low! So it seems that even with the 31K hit now, I'm still up ahead considerably, assuming the laws remain the same and my back-of-the-napkin calculations are somewhat accurate.
Am I missing something here? Why wouldn't I not do this, other than the upfront tax liability cost?
As others have said, move the pre-tax dollars in your IRA to your 401k to enable the backdoor Roth process without pro-rata tax consequences.
Re: Backdoor Roth IRA Conversion
Ordinarily, a Roth conversion in your tax bracket will mean you end up with a little less money in the long run (compared to converting at a lower rate). It is generally better to do Roth conversions later on when your tax bracket is lower.
Agree that the flaw in your math is you didn't consider the "lost income" that the $31k in taxable would generate over the years if not used to pay taxes.
On the other hand, if $86k is going to end up being a very small percentage of a very large portfolio, converting to Roth now may be worth it to you. Then you can skip rolling that IRA into your 401k and you can use the backdoor Roth process each year without pro-rating.
Agree that the flaw in your math is you didn't consider the "lost income" that the $31k in taxable would generate over the years if not used to pay taxes.
On the other hand, if $86k is going to end up being a very small percentage of a very large portfolio, converting to Roth now may be worth it to you. Then you can skip rolling that IRA into your 401k and you can use the backdoor Roth process each year without pro-rating.
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