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Help with the backdoor Roth, please

Posted: Tue Jun 03, 2014 10:58 am
by Coiled_Snake
I am wondering if we screwed up the opportunity to get my wife a backdoor Roth this year.

Did a 401k rollover from old employer to a new Vanguard rollover IRA and contributed the max limit last month.

Can you help me out how to go about doing this the "right" way so that I can open a traditional IRA and do the backdoor Roth?

Thanks!

Re: Help with the backdoor Roth, please

Posted: Tue Jun 03, 2014 11:10 am
by The529guy
Coiled_Snake,

I figured out the mechanics thanks to tbf's Backdoor Roth: A Complete How-To. I think you will find it very helpful. If you have follow-up questions, the many backdoor Roth aficionados will surely chime in.

Good luck!

Re: Help with the backdoor Roth, please

Posted: Tue Jun 03, 2014 12:36 pm
by placeholder
If she has a rollover IRA with taxable money (probably) then that factors into the tax calculations for a conversion so is there a new 401k etc. that she can roll that into?

Re: Help with the backdoor Roth, please

Posted: Tue Jun 03, 2014 1:15 pm
by JW-Retired
Coiled_Snake wrote:I am wondering if we screwed up the opportunity to get my wife a backdoor Roth this year.

Did a 401k rollover from old employer to a new Vanguard rollover IRA and contributed the max limit last month.

Can you help me out how to go about doing this the "right" way so that I can open a traditional IRA and do the backdoor Roth?
If by "backdoor Roth" you mean the 2-step contribute-convert process resulting in negligible taxes owed on the conversion, then before 12/31/2014 you have to "hide" the rollover IRA funds in a 401k or another pre-tax account that is not a tIRA or a rollover IRA (which are really the same thing), or a SEP or SIMPLE IRA. See IRS form 8606 line 6 and note what happens if that line is not zero.
JW

Re: Help with the backdoor Roth, please

Posted: Tue Jun 03, 2014 3:58 pm
by Coiled_Snake
JW Nearly Retired wrote: a tIRA or a rollover IRA (which are really the same thing)
That is exactly what I was confused about. My wife's old employer 401k was moved to this new IRA. But I couldn't distinguish between traditional and rollover.

I still don't really see the easy thing to do though. How do I best separate the old 401k from this year's contribution since they are now together?

Re: Help with the backdoor Roth, please

Posted: Tue Jun 03, 2014 6:18 pm
by placeholder
The only option is to roll that into a qualified plan (401k 403b TSP etc.).

Re: Help with the backdoor Roth, please

Posted: Tue Jun 03, 2014 6:27 pm
by Alan S.
You would just roll the pre tax amount in the IRA into her current employer plan if they will accept it.

But it sounds like her regular non deductible TIRA contribution has been made into the former rollover IRA, and if so it is no longer a rollover IRA because it now holds regular contributions. If her plan will accept the pre tax amount from ANY non Roth IRA, no problem. But if her plan will only accept rollovers from rollover IRAs, then she will not be able to do the rollover.

Re: Help with the backdoor Roth, please

Posted: Tue Jun 03, 2014 11:55 pm
by placeholder
Well custodians tend not to retitle accounts in this case so one could legitimately state that it is a "rollover IRA" although swearing that the contributions to it were all from rollovers would be incorrect.

Re: Help with the backdoor Roth, please

Posted: Wed Jul 09, 2014 1:42 am
by celia
I'm not sure what you did. Call Vanguard and ask for the department handling retirement accounts. They'll be able to help you and tell you if there even is a problem. (The problem could be your terminology.)