Back door Roth and Traditional IRA type question

Submitted by Brian Smith on Wed, 2022-11-30 15:54

Good morning. If an individual has and IRA rollover account with a $0 balance and they want to do a back door Roth and contribute to the IRA and then immediately convert, does it matter if’s a IRA Rollover account with a $0 balance OR do they need to establish a Traditional IRA account type? Looking for some clarification. Thank you for your help in advance. Regards,
Brian



Submitted by Alan - IRA critic on Wed, 2022-11-30 17:05

As long as the balance is 0, it does not affect the back door Roth. The non deductible TIRA contribution could be made to the 0 balance TIRA, as that IRA has lost it’s rollover status with no balance.

Submitted by Brian Smith on Wed, 2022-11-30 18:21

Thank you Alan.  Follow up question.  If they had money in the IRA Rollover earlier in the year and it was moved to another retirement plan…hence the reason the IRA Rollover has a $0 balance, can they still do the Back Door Roth for 2022 and not have to worry about tax implications in this case?  Looking for clarification if the look at what was in the IRA Rollover at the beginning of the year to calculation, b/c if they do they might be better off doing this strategy in 2023.

Submitted by Alan - IRA critic on Wed, 2022-11-30 19:49

Depends on what type of retirement plan the funds were transferred to. If another IRA account, the back door conversion will be mostly taxable. If moved to a non IRA employer plan, then there is no problem with the conversion. The key is what the pre tax balance is at year end in all the owned non Roth IRA accounts.

Submitted by Brian Smith on Wed, 2022-11-30 19:55

Thank you Alan, that helps a lot!  The funds were moved into a non-IRA employer plan.

Add new comment

Log in or register to post comments