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TreecityRains
April 3, 2024
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401k Backdoor Roth conversion and pro rata rule

  • April 3, 2024
  • 1 reply
  • 0 views

Hi There, 

 

  1. I would like to rollover my old employer pre-tax 401k to a rollover IRA.
    1. Is there something called rollover IRA Vs a traditional IRA or are all these the same things? 
  2. I contribute pre-tax max to my current 401k.
  3. I contribute additional after-tax contributions to my current 401k and immediately convert them to Roth 401k. 
  4. If I do step 1. above and leave the funds in the rollover traditional IRA (pre-tax money from previous employer's 401k funds are in this IRA account), will pro-rata rule affect my contributions in step 3 Roth conversion?

Thanks!  

 

 

Best answer by AmyC

1.A rollover IRA is a version of a traditional IRA. They have the same rules once established as far as RMD, conversion to ROTH, etc. The difference is the term rollover identifies that it came from an employer sponsored plan.

2. great!

3. great!

4. No, the rollover IRA is all pre-tax dollars so all of it would be taxable in a conversion to ROTH. The pro-rata rule applies when you have both taxed and non-taxed dollars in the same account.

1 reply

AmyC
AmyCAnswer
Employee
April 3, 2024

1.A rollover IRA is a version of a traditional IRA. They have the same rules once established as far as RMD, conversion to ROTH, etc. The difference is the term rollover identifies that it came from an employer sponsored plan.

2. great!

3. great!

4. No, the rollover IRA is all pre-tax dollars so all of it would be taxable in a conversion to ROTH. The pro-rata rule applies when you have both taxed and non-taxed dollars in the same account.

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