Posted: 3/16/2026 11:09:10 AM EDT
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I plan to start doing Roth backdoor conversions from my traditional IRA (0 balance) to my newly opened Roth IRA account I make too much money to write off even my traditional IRA contributions, so the money going to the traditional IRA will be post-tax. When I do the conversion transfer, it offers me to either deduct taxes from the conversion or not deduct it - I guess it will wait for tax return time. Should I just select not to pay taxes at the conversion? |
IDF, A.A. 215, "Scorpion" Company. 1993-1996
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Originally Posted By Samal: Should I just select not to pay taxes at the conversion? I believe that any taxes withheld from the conversion amount would count as a distribution. The money was post-tax so no taxes would be due on the distribution, but if you are too young the 10% penalty on the withheld amount would apply. |
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So, I guess the better way to avoid any hit now is to just contribute to my 401K after-tax and do roth conversion there without any 10%, as it stays in the same plan I am 55, so still subject to 10% withholding, but I will do one IRA conversion to establish the Roth starting date, and when I hit 59, I will restart Roth backdoors in addition to the 401K Is that a good idea? |
IDF, A.A. 215, "Scorpion" Company. 1993-1996
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Originally Posted By Samal: So, I guess the better way to avoid any hit now is to just contribute to my 401K after-tax and do roth conversion there without any 10%, as it stays in the same plan I am 55, so still subject to 10% withholding....... There is no income limit to contribute to an IRA except that you cannot contribute more than you make. There is no withholding related to IRA withdrawals based on age. The default is that 10% is withheld for federal income taxes but you can opt out of that (and there are no requirements opting out). Is the only reason you cannot directly contribute to your roth IRA because you make too much money? Are you maxing out your 401k pretax contributions? If so, you don't want to reduce pretax just to make a post tax contribution. Have you checked to see if mega-backdoor is available? It seems like you're making this way harder than it is - just make a non-deductible traditional IRA deduction and immediately roth convert it and opt out of tax withholding. |
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Originally Posted By Morgan321: Your verbiage is confusing and wrong. There is no income limit to contribute to an IRA except that you cannot contribute more than you make. There is no withholding related to IRA withdrawals based on age. The default is that 10% is withheld for federal income taxes but you can opt out of that (and there are no requirements opting out). Is the only reason you cannot directly contribute to your roth IRA because you make too much money? Are you maxing out your 401k pretax contributions? If so, you don't want to reduce pretax just to make a post tax contribution. Have you checked to see if mega-backdoor is available? It seems like you're making this way harder than it is - just make a non-deductible traditional IRA deduction and immediately roth convert it and opt out of tax withholding. I am maxing out 401K including the catch-up, and the catch-up goes to Roth 401K as per new rules. On top of that, I am contributing to a 401K post-tax and convert that to a Roth 401K (megabackdoor). I was thinking in addition to that, to start contributing $8600 to the IRA and do a backdoor conversion... isn't a transfer out of a traditional IRA to the Roth IRA considered a distribution and is subject of 10% penatly before 59.5? |
IDF, A.A. 215, "Scorpion" Company. 1993-1996
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Roth backdoor no uses after tax money. There is no taxable amount. Tax is only applicable if converting pre-tax money or gains on the after tax. Conversions are not distributions. They are conversions. They have separate 1099 code (usually 2 or G) to identify these as exceptions to penalties. |
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Originally Posted By Samal: I was thinking in addition to that, to start contributing $8600 to the IRA and do a backdoor conversion... isn't a transfer out of a traditional IRA to the Roth IRA considered a distribution and is subject of 10% penatly before 59.5? Traditional Ira to Roth IRA is a conversion. It may technically be a distribution, but since it was immediately converted there is no tax or penalty due. All ira distributions of pretax money by default have 10% withheld for taxes, you can opt out of that if you want(which you should). You will get a 1099 that says you got the distribution, but since it was a Roth conversion the tax will not be added to your total tax on your 1040. |
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One thing to consider OP is what you're current 401k offers by way of investments and fees. Management fees are typically lower in 401Ks, though plenty of commonly suggested ETFs and MFs also have very low fees these days. @FALARAK who, IMO, always gives the best digestible feedback on these topics. |
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You have gotten pretty good advice so far. 1. If you are offered a "Mega Backdoor Roth" in your 401k plan, where you can make AFTER-TAX contributions then immediately apply an in-plan Roth conversion, you should fully max this out BEFORE messing with a Backdoor Roth IRA conversion. Backdoor Roth IRA conversions are more steps, and a bit more documentation at tax time. While Mega Backdoor ROTH is EASY, and accomplishes the same result but with a MUCH higher limit on the amount you can contribute/convert. 2. There is no tax liability when doing a "Backdoor Roth" IRA conversion. You simply make an after tax non-deductible IRA contribution to a ZERO dollar traditional IRA, and then you convert those funds using a typical Roth IRA conversion. You select no withholding because this is not a taxable event. However, you MUST ensure you do not have ANY other IRA's with pre-tax amounts in them, regardless of the IRA you are using for contributions. https://thecollegeinvestor.com/38006/how-to-do-a-backdoor-roth-ira/ I prefer to fill my "Mega Backdoor Roth" in the 401k first, before messing with a "Backdoor Roth". I actually do both, but most people wont/cant max both unless they are stuffing money for retirement catchups. Both the "Mega Backdoor Roth" in a 401k and the "Backdoor Roth" in an IRA will cause a 1099-R to be issued, to record the conversion. Neither are a taxable event (so there is no withholding needed). However, the backdoor roth is ever so slightly more complicated, as you get to fill an additional form at tax time, the form 8606 for non-deductible contributions to track your basis. |
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Originally Posted By JThompson: A lot depends on age and tax bracket. Looked into doing a conversion, but that would result in > 30% tax on it. Too close to retirement to make it worth while and not enough time to make up the difference. I wont do Roth conversions now while I am working, due to my tax bracket. However, I will do Roth conversions when I retire, and before Medicare age, because the tax impact will be much lower and will not impact IRMAA. |