Wondering if anyone has employed this strategy for separating pre and post tax IRA contributions so you can do a “clean tax-free conversion” of only AFTER-TAX contributions, and if so, how did it go?

My employer DOES allow non-plan roll-in contributions so I can make this work, but my spouse left her job so no longer has a 401K or anything with an employer, so how could we do this for her IRA which also has after-tax money in it?

Example –Ben is an IRA owner who is also a participant in a 401(k) plan that allows rollovers into the plan. His total IRA balance is $350,000, of which $40,000 are after-tax contributions. Ben is currently in the 24% ordinary income tax bracket, and he expects to be in the 12% income tax bracket in retirement. As such, an IRA-to-Roth IRA conversion would generally be inadvisable at this time.

Ben, however, can take advantage of his 401(k)’s provision allowing rollovers into the plan, and the exception to the Pro Rata Rule that IRA-to-plan rollovers enjoy. More specifically, Ben can rollover the entire account balance less after-tax contributions, for a total of $350,000 – $40,000 = $310,000, from his Traditional IRA, which represents the total of pre-tax funds accumulated in the account. Although such a distribution would normally be treated as consisting of a ratable amount of pre-tax and post-tax dollars, since the rollover destination is Ben’s 401(k), and after-tax dollars are not allowed to be rolled into such accounts, the entire $310,000 amount will be treated as consisting of pre-tax dollars!

And with $310,000 of pre-tax funds ‘siphoned’ out of the Ben’s IRA, the $40,000 left will consist entirely of after-tax dollars, which can then be converted to a $40,000 Roth IRA, which is a tax-free conversion since all of the remaining IRA dollars are entirely after-tax!