I tried to leave a comment with a link but youtube deletes them. I believe you are incorrect in worrying about having to worry about the IRS step doctrine. The 2017 Trump tax cut package specifically codified the process of a post tax regular IRA contribution being immediately rolled into a Roth IRA as legal.
Hi, great video, thanks. I rolled previous employers' 401ks into an IRA and then subsequently put that into an Annuity product (shows IRA as the |Type). Would this count in the IRA Aggregation calculation?
In 2022 I got tired of tracking all my non-deductible, co-mingled contributions to our TIRA's (and all the 8606's and spreadsheet I kept to identify the pre/post tax amounts). Learned of the option to roll the pretax portion into my employers 401K (which allowed it), thus allowing me to "separate the coffee from the cream." Did the same for wife's TIRA. Subsequently moved the remaining post-tax dollars into our Roth's. Glad that's over. I'd like to make a 2023 (again non-deductible due to income) TIRA contribution for each of us, and "back door" it into our Roths. My two questions....(1) Are we subject to the pro-rata rule on the conversion of the 2023 TIRA contributions? and (2) Once the $7500 for this year goes into our TIRA's (which have significant balances already) how do we identify and isolate just the 2023 after-tax contribution so we can move it into the Roth??
Excellent video. I have question. Based on your example if I converts 6K to Roth I will have to pay texes on $5640 (based on pro rata rule), that makes sense but on other side it means that $5640 in my SEP/traditional IRA is now non deductible; right? How does that work moving forward?
Hey, thanks for the information. To clarify if one only holds a ROTH IRA and employer retirement plans (401k/403b) then the pro rata rule wont incur additional tax when opening a simple IRA for the back door conversion?
Thanks for the great content. How to avoid the pro-rata rule, which option is better? 1: When we move the rollover IRA amount to our existing employer 401k. Does the order of conversion matter? For example, if I convert the Backdoor Roth first (post-tax non-deductible to Roth) and then convert the rollover IRA to the 401K? Since pro-rata rule only takes into account your full IRA balance as of Dec 31st and not on the date of the re-characterization? 2: Can we convert $1,000 of pre-tax rollover IRA and $6,000 of post-tax non-deductible funds to Roth, and then move the remaining balance to the existing 401K? Or should the pre-tax conversion must match the $6,000 post-tax conversion? Is there an IRS document that covers these types of scenarios? I appreciate your help. Srini
Q1) "Since pro-rata rule only takes into account your full *IRA balance as of Dec 31st* and not on the date of the re-characterization?" Correct if t-IRA balance = $0.00 on Dec 31 there is no pro rata tax. Q2) You owe tax on the $1,000 traditional IRA that is converted to Roth IRA. You may convert any t-IRA amount to Roth IRA.
You shouldn't love a Roth IRA, you should love the investment mix that you pay the least taxes on. So in my situation I guess I love about 60% to 70% traditional and the rest in a Roth. My goal is to pay the very least in taxes possible.
Jimmy -- if I'm not mistaken, the conversion had to happen in 2022. However, you can still make a 2022 non-deductible IRA contribution until tax filing deadline.
@@HowToRetire oh. So for an example, if I haven’t saved anything in IRA in 2022. I can save $6k for 2022 and $6k for 2023, then backdoor the total amount ($12k) into Roth before 2023.4.18?
Jimmy -- of course, always consult with your CPA before implementing any sort of tax strategies such as these. I'm not a CPA (nor would I want to be). However, in the example you mentioned, I believe you'd have until 2023.12.31 to make the actual conversion. The 2022 non-deductible IRA contribution is the only thing that would have a 2023.04.18 deadline, if I'm not mistaken. You'd have until 2023.12.31 to do everything else.
i FINALLY found the video that explains my situation -- having a rolled over IRA from old jobs
I tried to leave a comment with a link but youtube deletes them. I believe you are incorrect in worrying about having to worry about the IRS step doctrine. The 2017 Trump tax cut package specifically codified the process of a post tax regular IRA contribution being immediately rolled into a Roth IRA as legal.
Excellent vid! Best explanation on these mistakes that I have ever heard. Thank you!
Hi, great video, thanks. I rolled previous employers' 401ks into an IRA and then subsequently put that into an Annuity product (shows IRA as the |Type). Would this count in the IRA Aggregation calculation?
In 2022 I got tired of tracking all my non-deductible, co-mingled contributions to our TIRA's (and all the 8606's and spreadsheet I kept to identify the pre/post tax amounts). Learned of the option to roll the pretax portion into my employers 401K (which allowed it), thus allowing me to "separate the coffee from the cream." Did the same for wife's TIRA. Subsequently moved the remaining post-tax dollars into our Roth's. Glad that's over. I'd like to make a 2023 (again non-deductible due to income) TIRA contribution for each of us, and "back door" it into our Roths. My two questions....(1) Are we subject to the pro-rata rule on the conversion of the 2023 TIRA contributions? and (2) Once the $7500 for this year goes into our TIRA's (which have significant balances already) how do we identify and isolate just the 2023 after-tax contribution so we can move it into the Roth??
Excellent video.
I have question. Based on your example if I converts 6K to Roth I will have to pay texes on $5640 (based on pro rata rule), that makes sense but on other side it means that $5640 in my SEP/traditional IRA is now non deductible; right? How does that work moving forward?
Why all the complications after all those years of working ang saving for retirement? Life's already hard 😢
Hey, thanks for the information. To clarify if one only holds a ROTH IRA and employer retirement plans (401k/403b) then the pro rata rule wont incur additional tax when opening a simple IRA for the back door conversion?
Thanks for the great content.
How to avoid the pro-rata rule, which option is better?
1: When we move the rollover IRA amount to our existing employer 401k. Does the order of conversion matter? For example, if I convert the Backdoor Roth first (post-tax non-deductible to Roth) and then convert the rollover IRA to the 401K?
Since pro-rata rule only takes into account your full IRA balance as of Dec 31st and not on the date of the re-characterization?
2: Can we convert $1,000 of pre-tax rollover IRA and $6,000 of post-tax non-deductible funds to Roth, and then move the remaining balance to the existing 401K? Or should the pre-tax conversion must match the $6,000 post-tax conversion?
Is there an IRS document that covers these types of scenarios?
I appreciate your help.
Srini
Q1) "Since pro-rata rule only takes into account your full *IRA balance as of Dec 31st* and not on the date of the re-characterization?" Correct if t-IRA balance = $0.00 on Dec 31 there is no pro rata tax.
Q2) You owe tax on the $1,000 traditional IRA that is converted to Roth IRA. You may convert any t-IRA amount to Roth IRA.
You shouldn't love a Roth IRA, you should love the investment mix that you pay the least taxes on.
So in my situation I guess I love about 60% to 70% traditional and the rest in a Roth. My goal is to pay the very least in taxes possible.
I think you can still do Backdoor Roth IRA for 2022, before 2023.4.18
Jimmy -- if I'm not mistaken, the conversion had to happen in 2022. However, you can still make a 2022 non-deductible IRA contribution until tax filing deadline.
@@HowToRetire oh. So for an example, if I haven’t saved anything in IRA in 2022. I can save $6k for 2022 and $6k for 2023, then backdoor the total amount ($12k) into Roth before 2023.4.18?
Jimmy -- of course, always consult with your CPA before implementing any sort of tax strategies such as these. I'm not a CPA (nor would I want to be). However, in the example you mentioned, I believe you'd have until 2023.12.31 to make the actual conversion. The 2022 non-deductible IRA contribution is the only thing that would have a 2023.04.18 deadline, if I'm not mistaken. You'd have until 2023.12.31 to do everything else.
Your mistaken . There’s no reason to wait. No IRS law that states a timeline. Your giving BAD advice.
Akfunhog, this is simply helpful information, not advice. You're free to do it however you like!