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Backdoor and \"Mega-Backdoor\" Roth- can you do both?

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  • Backdoor and \"Mega-Backdoor\" Roth- can you do both?

    So I have submitted my $5500 for MY backdoor Roth.

    My husband, through his employer, has the opportunity to max out his 401a and 457. Within his 401a, he can contribute post-tax dollars and roll them into a Roth IRA. Can he also do a backdoor Roth? Will they both be submitted on the IRS form 8606?

    Thanks in advance!

  • #2
    Are you sure that the after tax 401a can actually be rolled into a Roth IRA? It is more likely he has the option to roll over the after tax contributions to a Roth 401a option. If so, then yes, he can do a Backdoor Roth IRA in the scenario you describe and only the IRA/Roth IRA transfer is reported on the 8606. The after tax contributions are not reportable.

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    • #3


      It is more likely he has the option to roll over the after tax contributions to a Roth 401a option.

      Ugh.... I am not sure. I will look into that. We haven't yet rolled it over to the Roth from his 401a... however when I asked Fidelity, who said we could roll it to his Roth per the plan policy. I will check though. Thank you!

      We haven't rolled it yet, as I have to fill out a form and have it notarized, each and every time it gets rolled over.

       

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      • #4
        There are only employee mandatory pre-tax contributions, employee after-tax contributions and employer contributions in a 401a. There are no employee elective contributions, so there are no designated Roth accounts to be used for an In-plan Roth rollover. However, in-service rollovers of after-tax contributions and earnings can and often are supported.

        You can do a direct rollover of both the after-tax contributions and any pre-tax earnings to a Roth IRA.
        The pre-tax earnings will be taxable, but there are no assets rolled over to the traditional IRA. So there is nothing to be reported on Form 8606.

        You can do a direct rollover of the after-tax contributions to a Roth IRA and the pre-tax earnings to a traditional IRA. Then you can do a Roth conversion and the pre-tax earnings will be reported on Form 8606 and taxable when converted.

        Nobody does this, because if you are going to convert them anyway you might as well go the single direct rollover to the Roth IRA.

        However, if you roll the pre-tax earnings to a traditional IRA and either the 401a or 457b accepts IRA rollover contributions. You can roll the pre-tax earnings back into that plan. Making the resulting rollovers entirely tax-free.

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        • #5




          There are only employee mandatory pre-tax contributions, employee after-tax contributions and employer contributions in a 401a. There are no employee elective contributions, so there are no designated Roth accounts to be used for an In-plan Roth rollover. However, in-service rollovers of after-tax contributions and earnings can and often are supported.

          You can do a direct rollover of both the after-tax contributions and any pre-tax earnings to a Roth IRA.
          The pre-tax earnings will be taxable, but there are no assets rolled over to the traditional IRA. So there is nothing to be reported on Form 8606.

          You can do a direct rollover of the after-tax contributions to a Roth IRA and the pre-tax earnings to a traditional IRA. Then you can do a Roth conversion and the pre-tax earnings will be reported on Form 8606 and taxable when converted.

          Nobody does this, because if you are going to convert them anyway you might as well go the single direct rollover to the Roth IRA.

          However, if you roll the pre-tax earnings to a traditional IRA and either the 401a or 457b accepts IRA rollover contributions. You can roll the pre-tax earnings back into that plan. Making the resulting rollovers entirely tax-free.
          Click to expand...


          Spiritrider, thanks for your clarification on the 401a rules. (I’m sure OP appreciates the answer, but I am grateful you kept me from steering her wrong.)

          SLC OB, I appear to have introduced some confusion regarding the 401a. Sorry about that.

          Just to complete the thought regarding the second part of your question as I understood it: if your husband did the direct 401a roll over to a Roth IRA as SR describes, it appears he could also do a straight up “backdoor Roth” in parallel with earnings from outside the 401a. Again, only the separate backdoor Roth transaction would be reported on the 8606 in this scenario.

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          • #6
            yes you can do both the backdoor Roth (which is really a contribution) and the mega-backdoor roth (which is really a rollover of after-tax money to a Roth IRA). These tutorials I also found helpful, if you find that  your husband's plan does allow for mega backdoor:

            https://www.whitecoatinvestor.com/backdoor-roth-ira-tutorial/

            https://thefinancebuff.com/mega-backdoor-roth-in-turbotax.html

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            • #7


              yes you can do both the backdoor Roth (which is really a contribution) and the mega-backdoor roth (which is really a rollover of after-tax money to a Roth IRA). These tutorials I also found helpful, if you find that  your husband’s plan does allow for mega backdoor: https://www.whitecoatinvestor.com/backdoor-roth-ira-tutorial/ https://thefinancebuff.com/mega-backdoor-roth-in-turbotax.html
              Click to expand...


              Super helpful links and info, thank you!!

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