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457b 401a Rollover or Not? Backdoor IRA options for a new attending

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  • 457b 401a Rollover or Not? Backdoor IRA options for a new attending

    I am a new attending (single, no kids) and I am interested in tax optimization and investing. I have 457b and 401a from my previous public university (i.e. govt) training programs, and I'm not sure what to do with these funds. I would prefer to combine everything for simplicity, but I think that the timing is not right.

    I would like to do a Backdoor Roth IRA this year, as my income will be over 116k.

    If I understand correctly, converting the 457b or 401a to a Roth IRA would expose me to tax at my marginal tax rate, which would be sub-optimal. If I convert these to traditional IRA, then I cannot do a proper backdoor Roth IRA contribution.

    I am a W2 employee, but my 401k doesn't kick in for a year, so I can't convert 457b/401a to 401k... yet.


    I'm thinking that the best move this year is to stand pat with the 457b and 401a for a year, and do a simple traditional IRA to Roth conversion this year. I also will contribute to an HSA. The rest of my savings would go to a taxed investment fund.

    Then next year when I get my work 401k, rollover the 457b/401a to 401k, and max my contribution to 401k. I can also do a traditional to Roth IRA conversion next year.

    Does this sound right? Is this the best I can do this year? (the 5500 backdoor, I also have a 3350 HSA for what it's worth) That kind of sucks if true.

    Or would I possibly be able to have a nominal amount in an individual 401k account (let's say $100 bucks), and rollover all of the 457b and 401a into it?

  • #2
    First of all, the Roth contribution amount phases out from $117k - $132k for you. This may put you in the position of a partial direct contribution and a partial backdoor contribution, depending upon your MAGI.

    You cannot open a SOLO-k without some earned income in a business you own. If you have any IC income, then by all means open a SOLO-k and roll your 401a and 457b into it. Otherwise, leave them be until you can either open a SOLO-k or roll them into your work 401k (if allowed). Whether or not to roll into work 401k is also dependent upon the quality of the plan. Do you want that $$ locked in that plan until you separate service?

    With income of "only" ~ $116k this year, my recommendation might be to just convert to a Roth, pay the taxes, and be done with it.
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