I recently got a new job that doesn't have a 401k. I rolled my previous 401k of $30k into a traditional IRA. I plan on contributing $12,000 to retirement this year but I know I can only contribute $6,000 to a Roth IRA. What is my best option to save for retirement? Should I use the backdoor Roth IRA method and if I do how much will I owe in taxes on the 30k? I don't think we'll go over the earning limits, our before tax household income will be about $190k, but if for some reason we do go over the limit what's the best option to save for my retirement?

  • Does your employer offer an HSA with a HDHP?
    – D Stanley
    Feb 26, 2020 at 16:12
  • Why would you convert the 30k to a roth (or contribute to a roth in general)? You're in a high tax bracket now (and live in CA to boot) - do you expect your tax rate to be higher at retirement?
    – D Stanley
    Feb 26, 2020 at 16:13
  • @DStanley After I converted that I would be able to add more than $6k to the Roth using the backdoor roth method right? Right now I have no tax advantaged place to put my retirement money after the $6k roth limit. I don't want a HDHP since I need to use my health insurance. Feb 26, 2020 at 16:23
  • I use my insurance too and have a HDHP. Look at the difference in premium relative to the deductible, In my experience the cheaper premium and tax benefit of the HSA outweigh the increase in deductible. Plus you're not guaranteed to use the deductible, but you are guaranteed to pay the premiums.
    – D Stanley
    Feb 26, 2020 at 16:25
  • You don't need to convert the existing IRA to contribute to a Roth.
    – D Stanley
    Feb 26, 2020 at 16:27

3 Answers 3


First of all, a "backdoor Roth IRA contribution" (i.e. a non-deductible Traditional IRA contribution followed by a conversion to Roth IRA) does not allow you to contribute more than $6000 to your IRAs in a given year. The annual contribution limit of $6000 is for the sum of Traditional IRA contributions and Roth IRA contributions. So if you contributed $6000 directly to Roth IRA already, you would not be able to make any Traditional IRA contribution as part of the backdoor. The sum of both contribution methods must still be under $6000. You do not get to contribute more as part of the backdoor. The only purpose of a backdoor Roth IRA contribution is to avoid the Roth IRA contribution income limits.

However, having pre-tax money in your Traditional IRA will mess up the backdoor, as the "pro-rata rule" requires that all conversions from Traditional IRA come from pre-tax and after-tax amounts in the same proportion as in your Traditional IRAs overall, and $30k pre-tax with $6k after-tax will mean that 5/6 of your Traditional IRAs is pre-tax and 1/6 is after-tax. So if you then convert $6k to Roth IRA, $5k of it is pre-tax and you will need to pay tax on that, and the remaining $30k in your Traditional IRA will be $25k pre-tax and $5k after-tax. Both of these situations are not ideal.

There isn't any good way of contributing more than $6000 to retirement accounts if you don't have a 401(k) (other than the HSA that D Stanley already mentioned).

Another thing I will mention is that if you didn't contribute to the 401(k) this year (including on the final paychecks of your last job if they were within this year), you can deduct a Traditional IRA contribution no matter how high your income is (assuming your spouse doesn't contribute to a 401(k)). That will still not allow you to contribute more than $6000 to your retirement accounts, but it will be more in line with you making mostly pre-tax contributions like you were making previously with your 401(k). Or you can contribute to Roth IRA if you believe your tax rate will be low this year, but if it becomes high unexpectedly, you can recharacterize it into a Traditional IRA contribution, which you can deduct.

  • 1
    Thank you. It's all starting to make sense. I don't understand why everyone can't have their own personal 401k that they take from job to job. It seems like it would be a better system. I'll see if I can have an HDHP. Feb 27, 2020 at 18:52

how much will I owe in taxes on the 30k?

Your marginal tax rate times 30k (possibly more if it pushes you to the next income bracket). Note that this isn't a "backdoor" Roth - you can convert an existing IRA to a Roth at any time - you just need to pay the tax. A backdoor Roth is when you can contribute to an IRA but not a Roth - you contribute to the IRA then convert it to a Roth in the same year.

I would just leave your money in the IRA and contribute more to it to get the tax break since you're already in a high tax bracket and will have high CA state taxes. Then, look at a Spousal IRA if applicable, then fund an HSA if your employer offers a high-deductible health plan (the tax savings and premium savings outweigh the higher deductible in my experience).

You can also look at special-purpose tax-advantaged accounts like dependent-care FSAs and education savings accounts if those are applicable.

At worst, you can fund a non-tax-advantaged account and invest in tax-free investments like municipal bond funds (allowing you to make the tax-advantaged accounts a little more risky)

  • I'm not sure if I have an HDHP, I don't get healthcare until 90 days. My question is does it make sense to convert my traditional IRA to Roth so that I can then contribute $6k after tax dollars this year to my IRA and do the Roth conversion in addition to my tax deductible $6k roth contributions? As far as I understand as long as I have pre-tax dollars in any traditional IRA I will have to pay taxes to convert that to Roth IRA so I would have to convert the $30k before doing this. Feb 26, 2020 at 16:53
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    You don't need to convert an existing IRA to contribute to a Roth. You can leave the IRA alone and contribute to a new Roth account. I see no pressing reason for you to convert (or to even contribute) to a Roth given the high tax rates you'll pay.
    – D Stanley
    Feb 26, 2020 at 17:07
  • Ok, so $6k to the Roth and $6k to HSA if I have it or non-tax advantaged account if I don't? Feb 26, 2020 at 17:52
  • @DStanley I'm understanding the OP's comment here to be saying that his income is too high to qualify for Roth contributions and he's asking whether it makes sense to convert his traditional IRA to Roth so he can do a backdoor-Roth with his $6000 IRA contribution limit (presumably to avoid worrying about the pro-rata rule)
    – Daniel
    Feb 26, 2020 at 18:16
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    @DStanley If you try to do a backdoor Roth conversion when you have additional money in a traditional IRA (even if it's a different account), you will be subject to the pro-rata rule which may not be what you want.
    – Daniel
    Feb 26, 2020 at 19:47

There are a few things that may be getting conflated here.

"Back-door" Roth - This is used to mean that you are beyond the income limit to deposit to a Roth. So, you deposit to a (non-deductible) Traditional IRA, and quickly convert it to Roth. The negative to this, is that any pretax Traditional IRA money is prorated for taxation. e.g. you have $30,000 in your TIRA, You deposit $6000 and convert $6000 to Roth. Now since 30/36 (or 5/6) is pretax, you pay tax on $5K of the conversion, and have $1 in non-tax ira money in the TIRA.

You stated you will be below the $196K cut off. No back door. Just a Roth deposit. If your taxable income (not gross, taxable) is under $168,400, consider converting the exact amount from the TIRA to bring your taxable up to that number. It's the top of the 22% bracket.

  • Thank you. I think I understand now. Non-401k accounts are confusing! Feb 27, 2020 at 18:49

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