17 votes

Employer offering Roth 401k as well as traditional 401(k), established in career

The Roth/Traditional decision is complex, but can be broken down into a set of simple rules. Ideally, you want to choose to tax your money at the lowest possible rate. This specifically refers to ...
JTP - Apologise to Monica's user avatar
13 votes
Accepted

Where can I transfer rollover IRA funds to without it becoming income?

You will need to move it to a Traditional IRA if you want to avoid incurring any taxes in the current year. A Roth IRA is for after tax money. Also, you need to be very careful about how you do the ...
JohnFx's user avatar
  • 53k
10 votes

Roth 401k Contribution limits reset on job change

Rollovers are different than Contributions. You can rollover any amount as often as you want in every year, as it is basically just a transfer to an equivalent ('already taxed retirement') account. ...
Aganju's user avatar
  • 37.7k
10 votes
Accepted

Why do Roth IRAs have income limits if you can just do a backdoor IRA contribution?

There used to be income limits on Roth conversions. They were eliminated in 2010 by the Tax Increase Prevention and Reconciliation Act of 2005, probably to increase tax revenue. This combined with the ...
Craig W's user avatar
  • 15.8k
10 votes
Accepted

When rolling over a Roth 401(k) to a Roth IRA, does one have to pay any tax?

No, Roth accounts are from already taxed money, and changing the provider has no effect. The only tax you pay for Roth money is on the gains you made and only if you take it out before you are 59.5 ...
Aganju's user avatar
  • 37.7k
8 votes

Employer offering Roth 401k as well as traditional 401(k), established in career

In addition to JoeTaxpayer's thorough answer, I just want to tackle one particular question that was also asked: ...all employer contributions are pretax? There are a few main reasons that ...
TTT's user avatar
  • 47.2k
7 votes
Accepted

Roth 401k Contribution limits reset on job change

if I roll over existing Roth 401k to Roth IRA, will it allow me to put a full 18k in the new Roth 401k from the new employer? No. The contribution limit for one year is $18k for all employee ...
D Stanley's user avatar
  • 133k
7 votes
Accepted

Converted Traditional IRA to Roth IRA (backdoor) with money market funds, is that a mistake?

Don't worry about it. In my opinion, the article that you cite is raising unnecessary fears, but if you are really concerned about the matter, from 2023 onwards, do the investments etc. Just be aware ...
Dilip Sarwate's user avatar
6 votes

Employer offering Roth 401k as well as traditional 401(k), established in career

(Really a comment on JoeTaxpayer's answer but it's too long) There's one big factor that for some people tips things strongly in favor of the Roth: While the limits on paper for traditional and Roth ...
Loren Pechtel's user avatar
6 votes
Accepted

2014 Traditional IRA Contribution that was not Deducted

Money in an IRA that has both deductible and non-deductible contributions in it is called mixed basis. Any withdrawal - including a conversion - must be taken proportionally from each category (after ...
Joe's user avatar
  • 35.8k
6 votes
Accepted

When doing a Roth conversion, is amount converted after tax?

All $30000 goes into the Roth IRA and you pay a separate tax bill of $3000. Or more specifically, it it taxed just like if your your regular income went up by $30000 (assuming the entire conversion ...
user102008's user avatar
  • 17.1k
6 votes
Accepted

Calculating tax on 401(k) to Roth IRA conversion

Pre-tax 401(k) to Roth IRA conversions are always taxed as regular income. Remember contributions to a pre-tax 401(k) come from income that has never been taxed, so they're taxed when you withdraw or ...
Craig W's user avatar
  • 15.8k
6 votes

Do we need to consider the account balance as limit when converting from Traditional IRA to Roth IRA?

I do that every year. There is no limit on the amount you convert; the only consequence is the taxability - you will have to pay taxes for the gains you converted. At the end of the year, the provider ...
Aganju's user avatar
  • 37.7k
6 votes
Accepted

Questions about transferring from Roth to Traditional IRA

What you are looking to do is called a "recharacterization" of your IRA contributions, and you are in luck; you still have time to recharacterize your 2019 Roth contributions. The idea is pretty ...
Daniel's user avatar
  • 5,330
6 votes
Accepted

Possible to open multiple IRA accounts from the same institution?

Yes, you can. It is not needed in a scenario you described, but can be useful if, for example, you want different mixes of investments or different beneficiaries or something like that. For the ...
littleadv's user avatar
  • 171k
5 votes
Accepted

Can you transfer a Roth IRA to someone else?

Yes. Dying works great for what you'd like to accomplish. The key point is that you need to specify a beneficiary (or multiple beneficiaries) on the account . When you meet your maker, the beneficiary ...
JTP - Apologise to Monica's user avatar
5 votes
Accepted

Same day Roth IRA conversion but lost some money -> How do I list that on my taxes?

You don't. Say you deposited $5000. Then you converted $4950 to Roth. You declare $4950 as the amount converted and you're done.
JTP - Apologise to Monica's user avatar
5 votes
Accepted

Can I still convert a tradtional IRA into a Roth IRA for my 2016 taxes?

No. The "last year" choice is for new deposits. i.e. I have until tax day this year to make the deposit for tax year 2016. Conversions are made as of the date they occur, in other words, a ...
JTP - Apologise to Monica's user avatar
5 votes
Accepted

If I have a 401k and a traditional IRA, am I at risk of paying double taxes if I convert to a Roth IRA?

You won't end up being double taxed. The money in your Traditional IRA can be grouped into three categories: Deductible contributions Non-deductible contributions Earnings If you convert the entire ...
Craig W's user avatar
  • 15.8k
5 votes
Accepted

Mega backdoor: After-tax 401k -> Roth IRA in employer's plan while having an existing pre-tax traditional IRA with a different institution

I'm guessing you heard about how an existing pre-tax Traditional IRA interferes with the regular backdoor Roth IRA. To avoid income limits on direct Roth IRA contributions, you first make a non-...
Craig W's user avatar
  • 15.8k
5 votes
Accepted

Is there any upside in electing to have federal taxes withheld during a traditional IRA to Roth IRA conversion?

Typically, a conversion from IRA to Roth IRA is a taxable event, so you should expect to owe taxes at the end of the year. Unless you plan your tax load and know what you're doing, this can end with ...
Aganju's user avatar
  • 37.7k
5 votes
Accepted

Does a pro-rata backdoor Roth IRA conversion come from each IRA proportionally or just the one being converted?

The post-conversion balances would look like A: Deductible IRA: $5000 Non-Deductible IRA: $0 Roth IRA: $5000 The brokerage has no idea how much of your IRAs are deductible, and are just going to do ...
Craig W's user avatar
  • 15.8k
5 votes
Accepted

How should I backdoor my Roth IRA?

The $2500 is pre-tax money either from a rollover or a deductible contribution before 2019? If your plan is to convert it, you could actually make your non-deductible Traditional IRA contribution for ...
Craig W's user avatar
  • 15.8k
5 votes

Converted $1 more than the IRS limit when doing backdoor Roth conversion

There is no penalty or limit on conversions, ever. You can convert a million (if you manage to have in your IRA, which is hard to do), and only pay taxes for it, no penalty, so you are clear of ...
Aganju's user avatar
  • 37.7k
5 votes

Where can I transfer rollover IRA funds to without it becoming income?

Yes, you can move it to a Traditional IRA per JohnFx's answer without incurring penalties. However, one big thing to note is that if a future employer offers a 401k and you wish to move your money ...
MonkeyZeus's user avatar
  • 8,383
5 votes
Accepted

Does 'Taxable Income' from a Roth conversion count as income source for IRA contribution?

The sum of your (Traditional and Roth) IRA contributions cannot exceed your "taxable compensation" for the year. (Or, for spouses filing as Married Filing jointly, the sum of both their IRA ...
user102008's user avatar
  • 17.1k
5 votes
Accepted

Automated/Least Painful Backdoor Roth IRA + Nuanced Questions

You don't have to open and close a traditional IRA every year. You can create one, convert everything so it's empty, but leave it open until next year. But doesn't make a big difference because ...
Craig W's user avatar
  • 15.8k
4 votes

Transferring IRA funds into Spousal Roth IRA

No. The "I" stands for individual. Funds cannot be transferred between spouse's IRAs with 2 exceptions that I know. After death, the surviving spouse can take the funds into her name, or upon divorce, ...
JTP - Apologise to Monica's user avatar
4 votes

Mega backdoor Roth: Is there a 10% penalty if I withdraw from a Roth IRA after an in-service conversion from after-tax 401(k)?

Conversion of after-tax 401K into a Roth is known (on Bogleheads for instance) as a Mega Backdoor Roth IRA. Recent tax rulings seem to allow for this kind of transfer more cleanly. After conversions,...
Egret's user avatar
  • 181
4 votes
Accepted

Why would an employer not allow their employees to perform a "mega Roth IRA backdoor" (i.e., convert from an after-tax 401(k) to a Roth IRA)?

My educated guess: cost, both in dollars and time. First off, adding an after-tax option adds another layer of complexity. I would not be surprised if 401(k) providers charged more for it. On top of ...
Craig W's user avatar
  • 15.8k

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