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Can I do a Backdoor Roth?

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  • Can I do a Backdoor Roth?

    Greetings...

    My wife rolled over her previous 403(b) to a Vanguard Rollover IRA (traditional IRA, not a Roth IRA).

    My question is, since she now has a significant IRA at Vanguard, does this prevent us from doing a Backdoor Roth for her? (note: we do not want to convert her entire traditional IRA to a Roth IRA since it would result in a very sizeable tax burden).

    Am I thinking about this correctly?  Does this prevent us doing a backdoor Roth for her?

    Thanks!

  • #2
    It doesn't prevent you from doing a backdoor Roth, but you'll pay a lot of tax on it.  Any chance she can set up an individual 401k for any side business?  If you set up one that accepts rollovers you can put the tIRA money in there and do the backdoor tax free.

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    • #3
      Like ENT Doc said, not impossible, but now expensive. Pro Rata rules will cause a tax burden for you.

      Let's say the previous 403b IRA is $45,000. You open a second IRA and put $5,000 in it. Then you want to convert that $5,000 contribution to a Roth.

      The IRS will say that $4,500 of that $5,000 conversion was prior 403b money, and the other $500 comes from the new IRA. You have to pay tax on the $4,500 because the contribution was previously tax-advantaged.

      Is she still working? If she has an employer-sponsored retirement plan, see if it will accept roll-over money from the Vanguard IRA.

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      • #4




        My wife rolled over her previous 403(b) to a Vanguard Rollover IRA (traditional IRA, not a Roth IRA).

        My question is, since she now has a significant IRA at Vanguard, does this prevent us from doing a Backdoor Roth for her? (note: we do not want to convert her entire traditional IRA to a Roth IRA since it would result in a very sizeable tax burden).

         
        Click to expand...


        PDAllen-EA had a good idea if your wife has access to a plan at her current employer that will accept incoming rollovers. Even better would be some IC income to allow either of you to set up a SOLO-k and do a rollover. Do you get paid via 1099 on moonlighting or at your day job? If so, set up a SOLO-k and hire your wife for administration. Best would be for her to set up her own SOLO-k with profits from a side job. Then she'll maintain control of her investments and would not be limited to her employer's choices.
        Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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