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Rollover 403b to traditional IRA with existing backdoor roth IRA?

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  • Rollover 403b to traditional IRA with existing backdoor roth IRA?


    I have started a new job and have a 403b through my prior employer. The investment options are limited and I'd like to rollover that 403b to a traditional IRA. However, I have an existing backdoor Roth IRA. Are there better options for what to do with that 403b?

    Thanks in advance!

  • #2
    Does your new employer offer a retirement plan?


    • #3
      Yes. They offer a 401k with Charles Schwab but I am ineligible for the first year from start of employment.


      • #4
        Just one clarification, you have a Roth IRA. There’s no such thing as a ‘backdoor Roth’ account. The backdoor term is used to describe the process someone that is ineligible for a direct Roth uses. Some of those more savvy with retirement plan options may chime in with a more efficient and better option but I’d probably leave it there for a year to avoid any headaches.


        • #5
          Ok thanks. And then roll 403b into new 401k?


          • #6
            That’s probably what I’d do but, again, someone may chime in with a better plan.


            • #7
              Any year you do a Roth conversion with non-deductible traditional IRA basis, there will be prorata taxation of all pre-tax balances in all traditional, SEP and SIMPLE IRA accounts on 12/31.

              If you have done such a conversion this year, as pointed out by CordMcNally you should not rollover your 403b to a traditional IRA. The relative timing of the Roth conversion and rollover are irrelevant.


              • #8
                Can you give us some clarification on the Roth IRA? Did you convert from a non-deductible TIRA to a Roth in 2021 or in a prior year?

                Also, does your new plan allow rollovers from other employer plans? You need to check before making the assumption - most plans do, but not all.

                Finally, will you be in a lower tax bracket this year than you will in the future? If so, that might support a consideration of rolling at least a portion of the 403b to a Roth IRA.

                IF your new plan allows roll-ins and IF you didn’t convert from a post-tax TIRA to a Roth in 2021, there is no problem will rolling the 403b out to a TIRA. You can even make a backdoor Roth conversion for 2021’s after tax TIRA contribution if you wait until early 2022. Then roll the 403b to the new 401k before 12/31/22.
                My passion is protecting clients and others from predatory and ignorant advisors 270-247-6087 for CPA clients (we are Flat Fee for both CPA & Fee-Only Financial Planning)
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