Backdoor Roth Question
I found the article, “The Definitive Guide to the Back-Door Roth” very helpful, but have an additional question..
My high-income client has a 401k and an IRA (all pre-tax), but would like to fund a Roth. If he transfers the entire IRA balance into his 401k now, to avoid the pro-rata rule, can he make a non-deductible contribution to a T IRA in 2017 and immediately convert to Roth? Or does he need to wait 2018? My understanding is that he could do it in 2017 because the 8606 asks for a Dec 31 balance, which will be zero.
Also, are contributions to Roth/IRA subject to the overall limit for plan contributions? Client may max out his 401k P/S contributions in a given year.
Thanks.
Permalink Submitted by Alan - IRA critic on Mon, 2017-08-28 17:32
Yes, if he can complete the pre tax IRA to 401k rollover before year end, he can convert a ND IRA contribution to Roth tax free in 2017. Roth IRA contributions are not affected by 401k contributions other than the modified AGI for client’s filing status cannot be too high for regular Roth IRA contributions. There is no overall contribution limit for 401k and IRA contributions. Each plan has it’s individual limits only. There are also is no MAGI limit for ND TIRA contributions or the conversion that follows.