Warning

 

Close

Confirm Action

Are you sure you wish to do this?

Confirm Cancel
BCM
Durkin Tactical Franklin Armory
User Panel

Posted: 5/26/2022 10:48:53 AM EDT
Wife quit her job earlier this year to be stay-at-home-mom. Her income had us over the Roth eligibility limits 2018 through 2021, but now we can both contribute to Roths this year. She also has a 401k from that job and previous jobs.

I've already opened a Roth for myself. I plan to open a spousal Roth for her now so we can max both out this year.

My main question is, should I do a backdoor Roth for all of her 401k money? (about $100k) Maybe even my old 401ks, too (another $100k)? Do I use the same Roth accounts to do the backdoor?


Facts:
- My current job doesn't offer 401k
- I cut back on my retirement contributions for the past 2 years since I took a big pay-cut for this job. My income will certainly be increasing over the next few years. My wife was maxing her 401k the past 2 years.
- We are both 31 years old
Link Posted: 5/26/2022 12:58:35 PM EDT
[#1]
Why backdoor money and pay taxes on it when you're eligible for a regular Roth?  Seems like a bad idea, but I may be missing something.  I assume your 401k was pre-tax and not Roth 401k?  I would just convert the 401ks to IRAs and be done with it.  Then max out your Roths.  Leave the new IRAs alone until you retire or you reach the limit where you would rather have the tax deduction and contribute regular IRA money instead of Roth.

Back door Roths are generally for high earners that have run out of ways to get money in ritirement accounts.  Just an opinion and not advice.
Link Posted: 5/26/2022 1:06:24 PM EDT
[#2]
doing a back door Roth is because you looked into a crystal ball and figured better to pay tax on it now than later.

there are too many variables for me to be comfortable advising on this one way or another except to say go see a financial adviser, lay out everything for him so he can advise you on your best course of action
Link Posted: 5/26/2022 2:23:36 PM EDT
[#3]
Okay, I think I have a better understanding of back door now. I was over thinking it.
Link Posted: 5/26/2022 8:00:37 PM EDT
[#4]
There are a couple of things to look at:
- The tax issue, and
- Is there a chance you won't need the IRA funds for day to day living expenses when you retire?

Traditional IRA's have required minimum distributions (RMD's) starting at age 72 for us youngsters.  Roth IRA's do not.  So, it's good to have some funds in a traditional IRA or 401k, and some funds in a Roth IRA.  Then, if you don't absolutely need cash for living expenses then you don't have to make a withdrawal from your Roth.  If you need it for an unexpected expense, you can make a withdrawal without taking a tax hit.
Link Posted: 5/28/2022 9:16:24 AM EDT
[#5]
Quoted:
Wife quit her job earlier this year to be stay-at-home-mom. Her income had us over the Roth eligibility limits 2018 through 2021, but now we can both contribute to Roths this year. She also has a 401k from that job and previous jobs.

I've already opened a Roth for myself. I plan to open a spousal Roth for her now so we can max both out this year.

My main question is, should I do a backdoor Roth for all of her 401k money? (about $100k) Maybe even my old 401ks, too (another $100k)? Do I use the same Roth accounts to do the backdoor?


Facts:
- My current job doesn't offer 401k
- I cut back on my retirement contributions for the past 2 years since I took a big pay-cut for this job. My income will certainly be increasing over the next few years. My wife was maxing her 401k the past 2 years.
- We are both 31 years old
View Quote


I was told by TDAmeritrade that the procedure is thus;

Open traditional IRA.  Move 401K funds into that account,  Convert that IRA to a ROTH.   This was for the purpose of converting some of my 401K to my existing ROTH account, not sure if that's considered a backdoor ROTH move.   Also should you do the entire tax deferred amounts? - this is a function of taxation.   I would do the max amount that would make sense for your tax bracket - in other words there could be an amount of new income that would put you over a certain threshold whereby you would lose eligibility for other benefits that you could otherwise take advantage of.  Generally it's probably best to do a smaller amount each year.
Link Posted: 5/28/2022 3:55:52 PM EDT
[#6]
Backdoor only if you are over the income limit or if you want to contribute more than the $6/$7K per year in a regular Roth IRA. Otherwise just do a regular Roth.

If you are referring to a conversion, see if her plan offers a Roth option and a in plan conversion for terminated members. If not you’ll have to roll to an Ira first then do conversions to Roth. Just note that if you have an IRA currently (except for couple excluded types) you can’t do a backdoor Roth without running into the pro rats rule.  Watch your taxable income and convert up to whatever tax bracket makes sense.  Don’t forget to make estimates quarterly tax payments so you don’t get hit with a Penalty by the IRS.
Close Join Our Mail List to Stay Up To Date! Win a FREE Membership!

Sign up for the ARFCOM weekly newsletter and be entered to win a free ARFCOM membership. One new winner* is announced every week!

You will receive an email every Friday morning featuring the latest chatter from the hottest topics, breaking news surrounding legislation, as well as exclusive deals only available to ARFCOM email subscribers.


By signing up you agree to our User Agreement. *Must have a registered ARFCOM account to win.
Top Top