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  • Back Door Roth Help

    Question;

    Have an employer 401K that is being terminated and unfortunately my only option is to rollover to a traditional IRA which in the past was used for Back door roth purposes. Had always kept the number on this account 0$ until now.  However when this rollover takes places how would I be able to still contribute the $5500 yearly and convert to Roth? Thanks for the help.

  • #2
    You will still be able to to do, but you will pay taxes on the back door conversion.

    • Is it possible to wait until Jan 2017 to roll out?

    • Will have have access to a new 401k at your new employer that will accept roll-ins?

    • Do you have any IC income for this year or is there a possibility of doing some IC work? If so, you could set up a SOLO-k and rolling your 401k into it.

    • If your question is, "Do I still qualify to contribute $5,500 to an IRA?", the answer is "yes". A rollover into an IRA does not disqualify you from contributing to an IRA.


    What matters is the balance at the EOY. If you can avoid having $$ in a pre-tax IRA on 12/31, you can still enact a tax-free back door Roth conversion.
    Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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    • #3
      Thanks for the reply.

       

      1. I was told by Vanguard that it is not possible to rollover an employer 401K to a Solo 401K apparently it is an IRS rule. No other employer 401K options for us, and rollover has to take place by Early November

       

      2. My main question is Is it possible to contribute an additional $5500 into the IRA and convert just that 5500 into a Roth like we normally do and keep the other amount in the IRA to not pay taxes?

       

       

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      • #4


        1. I was told by Vanguard that it is not possible to rollover an employer 401K to a Solo 401K apparently it is an IRS rule. No other employer 401K options for us, and rollover has to take place by Early November
        Click to expand...


        This is not an IRS rule, it is just a limitation imposed by Vanguard. Go to Fidelity.


        2. My main question is Is it possible to contribute an additional $5500 into the IRA and convert just that 5500 into a Roth like we normally do and keep the other amount in the IRA to not pay taxes?
        Click to expand...


        No, if you have a pre-tax IRA on 12/31, you will owe tax on the conversion to the Roth.

        So, #1 leads me to believe that you have a SOLO-k. If so, go to Fidelity (or any firm other than Vanguard) and roll the 401k into your SOLO-k. If necessary, you can roll it out to an IRA then roll into the SOLO-k, as long as it is done by 12/31.
        Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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        • #5
          1. Vanguard probably means that you can't roll-over the 401k into a solo-k opened at Vanguard. However, you can if you open your solo-k at Fidelity or Etrade. WCI did a comparison here.

          2. Sorry, you cant do that. If you have the pre-tax money sitting in a TIRA by 12/31, as Johanna said, you will hv to pay taxes on a pro-rata basis.

           

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          • #6
            got it. So perhaps what I can do is rollover to the vanguard IRA  (for now so I don't miss their deadlines) and then create a fidelity solo 401K (Have IC income) and rollover the  vanguard IRA to Fidelity solo 401K. Do you guys think that would solve my issue?

             

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            • #7




              got it. So perhaps what I can do is rollover to the vanguard IRA  (for now so I don’t miss their deadlines) and then create a fidelity solo 401K (Have IC income) and rollover the  vanguard IRA to Fidelity solo 401K. Do you guys think that would solve my issue?

               
              Click to expand...


              Yes, as long as you have the IRA moved to the SOLO-k by 12/31/16.
              Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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