Back Door Roll-in
I was made aware of an article written in Forbes entitled Roth for the Rich (google it and it is a good and informative read). I presently have a cost basis of $18K in nondeductible or after tax IRA contributions ($2K per year from 1991-1999) within my traditional IRA. After reading the article I want to “roll in” my pretax IRA contributions and associated earnings into my 401K (which is okay with Fidelity) the then remaining amount is $18K basis + earnings (which I calculated based on the yearly historic stock market, S&P 500, returns), the total of which is approx $60K. I then will convert that separated amount to my Roth account without tax consequences. That is my hope – however I need to confirm and verify with Fidelity that they will report the conversion without tax consequence for moving the earnings that accrued with the nondeductible after tax contributions.
Do you have any knowledge, thoughts or suggestions regarding this back door roll in technique.
I would greatly appreciate a response.
Permalink Submitted by mk foss on Thu, 2012-03-29 16:24
Rolling over everything except the basis is the strategy that gives you a tax-free Roth conversion. I’m not sure how Fidelity would handle this but I’m fairly certain they will advise you that the burden is on you to not roll any “basis” into the qualified plan. They will make it clear that they’re innocent and anything that doesn’t work is all on you.