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Backdoor IRA

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  • Backdoor IRA

    Dear Forum reader:  I have a question about backdoor IRA.  Can I roll money from a former employer's 401k into the traditional IRA at Vanguard after January 1, provided that the traditional IRA has $0 to start with, and then convert these rolled over money in the traditional IRA for a Back door IRA to the ROTH IRA at vanguard?

    I know traditionally backdoor IRA is to fund a traditional IRA and then convert them to ROTH IRA.  I want to do ROTH conversion for my regular 401(k), and was wondering if I can do it this way?

    Thank you and really appreciate any comments!

  • #2
    You can. You will pay taxes on the conversion however.


    • #3
      Thank you very much!  Therefore, this is considered a ROTH conversion and not a backdoor ROTH IRA, correct?


      • #4

        Thank you very much!  Therefore, this is considered a ROTH conversion and not a backdoor ROTH IRA, correct?
        Click to expand...

        Yes, you are talking about a Roth conversion. That does not prohibit you for engaging in a backdoor Roth, also, though.
        Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087


        • #5
          Please note that if you have any after-tax money in your former employer's 401(k), you might want to consider doing a Mega Backdoor Roth IRA with that money. Here's a great article on the subject of Mega Backdoor Roth and how to take advantage of after-tax contributions to your 401(k):


          • #6
            This may help. There really is no such thing as a Backdoor Roth in the tax code.

            It is simply a non-deductable traditional IRA contribution in conjunction with a Roth conversion. All Roth conversions are pro-rata of post/pre tax balances effective 12/31 of the year of conversion.

            What makes it an effective Roth IRA contribution is that there is little to no pre-tax balances on 12/31. This makes the conversion with little to no tax liability.

            It is really a matter of degree when you do a Roth conversion of all balances. Technically it is a pro-rata conversion. I you were to do a non-deductable contribution and covert it and significant pre-tax assets in the same year. It can also be considered effectively a tax-free conversion of the non-deductable amount and a fully taxable conversion of the pre-tax assets.

            Other than the way it is calculated on the form, it is only truly effectively pro-rata when you do a partial Roth conversion of available IRA assets.