My income exceeds the contribution threshold for IRA. I am trying to do back door Roth. A few years ago, I rolled traditional IRA into my prev employer's 401k plan. However, the problem with this approach is I'm limited to trade funds and stock offered by that plan only. It's my understanding that as long as all my traditional IRAs are rolled into 401k before 12/31, there will be no aggregation if I did Roth conversion. If that's true, can I take the following steps:Begin of the year, roll almost all positions from 401k to traditional IRA account ADuring the year, trade from IRA account A with wide choice of stock, future ...At some point, contribute to a dedicated traditional IRA B account and immediately convert to Roth IRAEnd of the year, close all IRA account A positions to cash and roll it back into the 401k account. Repeat the next year Can someone please confirm if this will cause any trouble at tax time?

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Question

Back Door Roth: Rolling Between 401K and IRA

Forum|Forum|1 year ago
May 20, 2024
1 reply
0 views

My income exceeds the contribution threshold for IRA. I am trying to do back door Roth. A few years ago, I rolled traditional IRA into my prev employer's 401k plan. However, the problem with this approach is I'm limited to trade funds and stock offered by that plan only.

It's my understanding that as long as all my traditional IRAs are rolled into 401k before 12/31, there will be no aggregation if I did Roth conversion. If that's true, can I take the following steps:

Begin of the year, roll almost all positions from 401k to traditional IRA account A
During the year, trade from IRA account A with wide choice of stock, future ...
At some point, contribute to a dedicated traditional IRA B account and immediately convert to Roth IRA
End of the year, close all IRA account A positions to cash and roll it back into the 401k account.
Repeat the next year

Can someone please confirm if this will cause any trouble at tax time?

Not A Product Question

fanfare

Employee

"My income exceeds the contribution threshold for IRA."

Your income limits the contributions to a Roth IRA, not a Traditional IRA.

That's the whole point of the Backdoor contribution trick.

you must have earnings.

For true tax-free operation, it is important to have a Traditional IRA that is empty to start.

@ansettax

ansettaxAuthor

Sorry, you're right. I was being sloppy in my question. However, the main question I have is if my plan of round trip rolling between 401k and IRA would serve its purposes. Can someone please help confirm I did not miss anything.