Back door Roth contributions

Submitted by Rod Friedman on Wed, 2018-03-28 12:23

I have a client who is 79 years old, works full time and participates in a Simple plan at work. He has a Roth IRA. Can he make a back door Roth contribution, I know not permitted from IRA but wondering about Sep and Simple Plans.
Thank you,
Rod Friedman



Submitted by Alan - IRA critic on Wed, 2018-03-28 15:40

He should first determine if his income allows a regular Roth IRA contribution. If not, the only way to get funds into his Roth IRA is to convert from a non Roth IRA because his age eliminates making a traditional IRA contribution. However, he cannot convert until his RMD is completed. He could convert directly from the SIMPLE IRA after the RMD for the year is completed, but only if the SIMPLE IRA 2 year waiting period has been satisfied. Such a conversion would be taxable unless he has basis (Form 8606) in his non Roth IRAs. As such it would not be a back door Roth in the usual sense.

Submitted by William Tuttle on Wed, 2018-03-28 15:53

  • There is no Backdoor Roth contribution. You can do non-deductible traditional IRA contributions and you can do Roth conversions. If you do a process of the former followed by the latter when there is little to no pre-tax balances in all traditional, SEP and SIMPLE IRA accounts. You have the effect of a Roth contribution. Hence the term Backdoor Roth.
  • So I have no idea what you are talking about when you say it is not permitted from an IRA. The non-deductible IRA contribution can go to a traditional IRA or a SEP IRA (if the custodian allows and properly tracks the contribution). Only employer contributions can be made to a SIMPLE IRA, including from elective employee salary reductions (deferrals).
  • Finally, any pre-tax traditional, SEP IRA and SIMPLE IRA balances interfere with a Backdoor Roth, because any Roth conversion is pro-rata of non-deductible basis and pre-tax balances in all such accounts.

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