Rollover Traditional IRA to 401K
I have a Traditional IRA account with Robinhood that I contributed in 2022 ($6000+$60match), 2023 ($6500+$65match) and 2024 ($7000+$210match). I have been investing in the stock market and it is $28,000 including gains. Now I realized that I made more than I expected in 2024 (more than $87,000) and can’t deduct my traditional IRA. I suppose I may make more in 2025 and will be disqualified to contribute to Roth IRA, so I am thinking of doing backdoor Roth IRA in 2025, and just did some research yesterday. Due to the pro rata rule, it is better to reset my traditional IRA account to $0 to avoid tax complications. My current employer offers 401K plan with Guideline including traditional 401K and Roth 401K, and I just checked I can roll my traditional IRA money in there, but I have a few questions.
- Does my 2024 traditional IRA contribution count as after-tax since it is not deductible anymore?
- How should I roll over to my 401K? Could I roll over my 2022+2023 traditional IRA contribution into traditional 401K since both are pre-tax and 2024 traditional IRA contribution to Roth 401K since both are after-tax? If not, is it better to rollover 2022+2023 traditional IRA into traditional 401k, and then convert 2024 traditional IRA contribution into Roth IRA in 2025?
- What should I do with the capital gains and Robinhood match when I rollover since they are all mixed together.
- Will the rollover count towards 401k limits?
Thanks for your help.
Permalink Submitted by Alan - IRA critic on Tue, 2025-01-07 15:41
First, be sure that your MAGI is not too high for a regular Roth IRA contribution. It appears that you file as single and regular Roth contributions phase out between 146k and 161k, a much higher amount than for deducting a TIRA contribution. If you are eligible you could simply recharacterize your 2024 TIRA contribution as a Roth contribution.
That would avoid having to roll your pre tax IRA value into the 401k, which would likely result in Robinhood clawing back all those matching contributions.
If you will be over 146k and proceed with the pre tax rollover, the rollover will not affect the amount of your 401k deferrals for 2025. And if you proceed, you should recheck to make sure that your 2023 and earlier contributions were actually deductible. For example a 2023 deduction begins phaseout at 73k, and any IRA basis is not eligible to be rolled into a 401k, so you need to be sure that your basis is not even higher than 7000.