Starting this year, I can no longer contribute to my ROTH IRA. I have three other IRAs:
- A rollover IRA (pre-tax), opened in 2020 when I rolled over an old 401k.
- A SIMPLE IRA (pre-tax), opened in 2020 with my old employer.
- A traditional IRA, containing $3k of post-tax contributions, uninvested, which I opened last week, intending to put $6k in there and do a backdoor ROTH IRA contribution.
After I opened the traditional IRA and put the $3k, I learned more about the pro rata rule. I understand that if I do the backdoor ROTH this year, equal amounts will need to be converted from each of the above IRAs, resulting in my needing to pay some taxes.
Optimally, I'd love to convert the rollover and SIMPLE IRAs into a new 401k which my current company is making available soon. However, I don't think I can do that because of how recently the rollover and SIMPLE IRAs were opened.
I want to get as much money into my ROTH as possible so I can enjoy tax-free growth. I'm only 27 so this is significant.
Given my situation, what's the best course of action here? Should I do pro rata conversions every year until I'm able to roll my pre-tax IRAs into my new 401k? I have the money to pay the taxes I need to, if that's the best decision in the long run.