Another Backdoor IRA Question

[nutty08]

Here's the background, I want to start funding a back door IRA but not quite sure what to do with my wife's accounts.

 

Me - currently employed

401K Pre and Post tax

Pre existing Roth IRA

Will need to setup a TIRA

 

Wife - currently stay at home mom

Pre-existing Roth IRA ~1k

Pre-existing Traditional IRA from a 401k rollover a few years ago. ~$7k in this one with about $1k of that in gains.

 

1)My understanding is that I can do a back door IRA right now for myself without any tax penalties, correct? (no prorata as the pre-tex IRA isn't mine)

2) For funding a back door IRA for my wife, what's the best way forward? She's not currently employed so no 401k rollover option. Since it's not that big an account do I just pay the tax from the prorata rule? Or roll it into something else? There's no way to roll it into my 401k, right?

 

Appreciate any help

 

thanks

 

[jfoxcpacfp]

Dr. Nutty,

1. You are fine to do a backdoor Roth for yourself.


2. I'd probably (don't know enough about your situation to be sure) recommend that you go ahead and covert your wife's pre-tax TIRA into a Roth, pay the tax, and start her backdoor Roth strategy.
   
   
   
   • No, it can't go into your 401k
   
   
   • With her ratio of Roth to pre-tax, it's going to be mostly taxable, anyway. Might as well go ahead and convert ~or~ don't do backdoor Roth's for her at all.
   
   
   • The gains in her TIRA are irrelevant.
   
   
   
   

[Peds]

Is she going to work again soon?

Can she make some 1099 income and open a solo 401k?

Otherwise just convert it and take the hit.

[nutty08]

I think she might go back to work in 2yrs or so. I might just wait on her until she goes back to work and roll it into a new 401k. Which is probably a wash to just converting it now and paying the tax now.

If I convert it to Roth I pay taxes at whatever bracket I'm in for salary income?

[Peds]

yup.