Back door Roth

Oct 16, 2021 19 Comments

Meed some help understanding the back door Roth method.
My income is above the limit to directly contribute to a Roth. My employer provides a pre-tax 401k without a mega back door option (also no post-tax contribution options). I contribute about 12k a year to this employer 401k (pre tax)

From what I understand, I can open a traditional IRA at any institution like fidelity or Charles swabb, and contribute 6k of post- tax money. From there I should be able to use a back door Roth to convert it into a Roth savings?

Can someone confirm if my understanding above is correct? Trying to understand what my options are. Also typically when do people contribute to their traditional Ira and trigger the back door Roth? At the start or end of the year?

TIA!

TC:250K

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TOP 19 Comments
  • Tableau
    bezozballz

    Go to company page Tableau

    bezozballz
    Also you can call fidelity or wherever you want to open the IRA and they’ll walk you through the steps. You can’t have pre-tax money in another old rollover 401k though. Step one is to move all of those to your current employers 401k. Taxes can get messy if you miss a step. Best of luck!
    Oct 16, 2021 5
    • Thanks for the link.

      So, does old 401K that's not rolled over but still in the original plan come under pro-rata rule? The Q is whether it would be considered as an IRA, which I guess it doesn't?
      The link doesn't seem to cover that.
      Oct 16, 2021
    • Flagged by the community.

  • Yes but this is likely going away in 2022 due to new laws
    Oct 16, 2021 1
    • Netflix
      WmuM44

      Go to company page Netflix

      WmuM44
      The proposed law doesn't get rid of regular Backdoor Roth IRA until 2032, and only for people with yearly income over $400k/425k/450k (single/HOH/MFJ).

      Mega Backdoor Roth (through your employer) would go away in 2022.
      Oct 16, 2021
  • Chime
    h88bfs6j

    Go to company page Chime

    h88bfs6j
    Best video explaining it - https://youtu.be/iD-M5Bxjv00
    Oct 16, 2021 0
  • You have until tax filing deadline for the year to contribute to traditional IRA for that tax year and you can do the conversion as soon as the money settles.
    For 2021, you will have until April 15th 2022 (or whatever the deadline will be next year if they push it) to contribute to the 2021 tax year’s IRA.
    Oct 16, 2021 0
  • Chime
    h88bfs6j

    Go to company page Chime

    h88bfs6j
    What is the maximum for backdoor roth per year? The same as normal roth? $6000?
    Oct 18, 2021 3
    • Chime
      h88bfs6j

      Go to company page Chime

      h88bfs6j
      Thanks a lot for this comment. I’ll try this for 2022. Essentially, I should do $6000 around feb (before deadline). And then, $6000 again in July?
      Oct 18, 2021
    • The second 6000 can be done anytime until tax deadline for 2022 (April 2023). Of course Biden is trying to take away this loophole for 2023, so, good luck. First Trump screws over the hard working W2 earners living in metro areas and then it’s Biden. No matter if it’s dems or Rs, they all just thing we are their cash cows.
      Oct 18, 2021