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Newbie at backdoor roth IRA

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  • Newbie at backdoor roth IRA

    So I'm finally in my first attending position job as a neonatologist - per usual, I had no idea what I was doing trying to do more than contribute to a 401K plan. I had 3 different 401K accounts due to different training locations/residency and fellowship plans. Being the newb that I am, I converted 2 of my old 401K accounts into my tIRA account (hindsight I should have just rolled them over to my current employers 401K account, SMH). It wasn't that much, just totaled 8K in funds. I thought I was making it simpler by not having 3 different 401K accounts. Then I started contributing to my tIRA with the plan of converting it this month to a Roth IRA.

     

    So currently I have 8K in rolled over 401K funds in my tIRA account + 2K of new funds I contributed before realizing what Ive done (I was so newb I didn't realize the 5500 cap applied to the all IRA funds even what I rolled over this year.

     

    So...what should I do with this 10K in my tIRA? Can I still backdoor convert 5500 of this tIRA money into a roth IRA even with most of it being from a rolled over 401K account? tIRA money just tIRA money right? Then just withdraw the 4500 excess? I've seen posts worrying about 0.02 cents left in the tIRA account -- this is a steep learning curve, but I'm trying to get up to speed! TIA!

  • #2
    Move the original tIRA to your 401k.

    Complete the 5500 contribution to now empty new tIRA.

    Convert the 5500 the next day.

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    • #3
      Either rollover the traditional IRA to your 401(k) or convert it and pay the taxes on it. Take your pick. It's got to be taxed at some point; prob not best now, but up to you.

      No one should worry about pennies or even double-digit dollars leftover in an account. If that ends up being taxed on a conversion, it might approximate the cost of a couple large 2-topping pizzas. I mean, I love pizza, but the point is to keep focus on big-picture things, here.

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      • #4


        So currently I have 8K in rolled over 401K funds in my tIRA account + 2K of new funds I contributed before realizing what Ive done (I was so newb I didn’t realize the 5500 cap applied to the all IRA funds even what I rolled over this year
        Click to expand...


        For 2018 there is a $5500 IRA direct contribution limit. There is no limit to rollovers and they do not count against the direct contribution limit.

        Rollover your entire pre-tax balance in all traditional, SEP and SIMPLE IRA accounts prior to 12/31. The pre-tax balance = the total balance - non-deductible basis ($2K if no after-tax 401k contributions).

        Make whatever portion of the remaining $5500 you want to now and do a Roth conversion of the entire remaining balance with little to no tax liability.

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