Back Door Roth Timing Question
Scenario:
I have a client that wants to do a Backdoor Roth but first we will need to roll their existing IRA into their employer’s 401(k) Plan to avoid the pro rata rule driven by the IRA aggregation rules.
Question: Does the rollover of her IRA to the 401(k) simply have to happen prior to the Backdoor Roth transaction or does it have to happen in the previous tax year so the IRA doesn’t exist on January 1st?
Permalink Submitted by Alan - IRA critic on Fri, 2020-02-28 19:40
The IRA to 401k rollover needs to be done by the end of the current year. However, since conversions can no longer be recharacterized if the 401k does not accept the rollover, it is now recommended to complete the rollover before doing the IRA conversion. The non deductible TIRA contribution can be done either before or after the rollover of the pre tax IRA balance to the 401k.