What are some points to consider when considering a non-deductible IRA contribution. Household income is way above the phaseout, but there’s also a substantial amount of deductible IRA dollars making a roth conversion less appealing.
Thank you. Is there any limitation on how long the pre tax IRA dollars need to be rolled into a current employer plan prior to doing a backdoor Roth conversion? For example, if we rolled over the pre tax dollars today into current employer plan, could we then complete a backdoor roth conversion for 2022 prior to the tax deadline?
The rollover to the employer plan must be completed prior to the end of the conversion year. However, because some rollovers to the employer plan are not able to be done, it is recommended to complete that rollover before converting. Therefore, you should first start that rollover process and right after it is completed with your pre tax IRA balance actually in the employer plan, then you should convert ASAP. Whether the original TIRA contribution was for 2022 or 2023 does not matter. The year the conversion is actually done (2023) is when it is reported. YOu could make your 2023 contribution and convert both years conversions in a single conversion. If you can get current with your contribution years so that you are not making prior year contributions anymore, your tax reporting will be simpler because the contribution and the conversion would then show on the same 8606 form.
Permalink Submitted by Alan - IRA critic on Mon, 2023-03-27 23:04
If the pre tax IRA dollars were rolled into a current employer plan, the ND contribution could be converted tax free (back door Roth). If that’s not possible with the current employer, if a job switch is likely in the next couple of years, the ND contributions could be made while waiting for a new employer plan that accepts IRA rollovers. Otherwise, it is likely preferable to invest in taxable accounts.