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Clarification re: Backdoor Roth and Spouse's existing Traditional IRA

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  • Clarification re: Backdoor Roth and Spouse's existing Traditional IRA

    I am 3 months into my first faculty job and starting to progress in our financial planning. My wife and I started a Roth IRA for each of us while I was a med student and have been contributing the max faithfully the last 4 years. In addition to maxing out my tax beneficial plans (403b/SRA and government 457) this year, I am planning on opening a tradition IRA for myself for a backdoor roth contribution.  I would like to continue to use the roth contribution for both myself and my wife; however, she  currently has a traditional IRA (about $12,000) originally from a 401k rollover from a previous job. Even though I will have a half years salary, I will likely be above the income threshold for direct Roth contribution. In order to avoid the pro rata rule, I would like to have both of our tradition IRAs have a balance of $0.00 in order to use the backdoor roth contribution for 2017.  What should I do with the balance of $12K in my wife's traditional IRA?

  • #2
    You could roll it into the roth and pay taxes on it.  Otherwise does she have any income currently or a solo 401k to roll it into?

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    • #3




      I am 3 months into my first faculty job and starting to progress in our financial planning. My wife and I started a Roth IRA for each of us while I was a med student and have been contributing the max faithfully the last 4 years. In addition to maxing out my tax beneficial plans (403b/SRA and government 457) this year, I am planning on opening a tradition IRA for myself for a backdoor roth contribution.  I would like to continue to use the roth contribution for both myself and my wife; however, she  currently has a traditional IRA (about $12,000) originally from a 401k rollover from a previous job. Even though I will have a half years salary, I will likely be above the income threshold for direct Roth contribution. In order to avoid the pro rata rule, I would like to have both of our tradition IRAs have a balance of $0.00 in order to use the backdoor roth contribution for 2017.  What should I do with the balance of $12K in my wife’s traditional IRA?
      Click to expand...


      This is the best time to convert to a Roth since next year you will, presumably, be in a higher tax bracket with a full year's faculty pay.  As  childay said, if she has SOLO-k availability, she can roll into that. Or, if she has a 401k or 403b at her current job, she should check to see if it accepts rollovers and r/o to her work plan (assuming it's not too crappy - but it's only $12k).
      Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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      • #4
        Thanks for your thoughts childay and Johanna. I agree this is the best time to convert the funds to the Roth and pay the tax. Is there anything I should watch out for in order to do this conversion correctly and pay the ordinary income taxes?

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        • #5




          Thanks for your thoughts childay and Johanna. I agree this is the best time to convert the funds to the Roth and pay the tax. Is there anything I should watch out for in order to do this conversion correctly and pay the ordinary income taxes?
          Click to expand...


          Not especially. You have until 10/15/17 to recharacterize, but i doubt you will want to do that, given the back-door Roth situation. You can liquidate and convert or convert "in kind", which means you simply change the character of your account from TIRA to Roth, without touching your investments.
          Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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