Backdoor Roth Question
Hi Alan,
I have a client that has an existing IRA balance – we’re going to roll this up to her 401(k) so we can start backdoor Roth contributions moving forward. I want to make sure we make the 2024 contribution before the tax deadline. Is there any issue if we complete the 2024 contribution/conversion now with the funds still in the IRA, knowing that we’ll roll the IRA to the 401(k) in the next month or so? Or do we need to wait until the IRA balance has been distributed from the IRA?
Permalink Submitted by Alan - IRA critic on Mon, 2025-03-10 12:45
It’s safer to complete the rollover of the pre tax amount to the 401k first, because if the plan does not accept the rollover for whatever reason, the client is not stuck with a taxable conversion. Client can make the regular contribution anytime up to 4/15, but if this 2024 contribution is made before the 401k rollover is completed, client must be sure not to roll any IRA basis into the 401k, and the 2024 contribution will amount to IRA basis since it will be non deductible.