Back Door Roth
I have a client who already has a rollover IRA. He & his wife are both high earners maxing out their 401k’s.
He asked about making after-tax IRA contributions and then converting those $’s to a Roth.
Before I got back to him, I wanted to make sure on this.
The way I remember it, is that you cannot just keep a separate IRA with the after-tax dollars and convert from just that account. The IRA’s would be treated in total, and you would have “cream in the coffee” problems.
Appreciate help in double checking this.
Jan
Permalink Submitted by Alan - IRA critic on Tue, 2017-05-16 23:54
Jan, you are correct. One possible solution is to roll the pre tax dollars in either or both of their IRAs into the 401k if the plan will accept the rollover. They can then do the back door Roth and convert tax free. The investment options and their expenses in the 401k should be considered before doing this.