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401k conversion / Backdoor Roth

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  • 401k conversion / Backdoor Roth

    Hi everyone!

    I am new to the forum and am a recent fellowship graduate with my first attending position. I am trying to sort through my finances and learn more about planning for my family's future.

    Right now I have approximately $17.5k in a 401k from residency which is in a Principal Lifetime 2050 Institutional (PPLIX).
    As well, I have approximately $20k in a 401a from fellowship which is in a Vanguard Target Retirement 2050 (VFIFX).
    Currently, I cannot contribute to my employer's 401k until I have worked with them for a year.

    I have never done a backdoor Roth before and, if my understanding is correct, I can contribute $6k for my spouse and for me in both December 2019 and again in January 2020.
    Can I transfer my 401k money (17.5k) to a traditional IRA and then convert this to the Roth IRA to perform the backdoor? Is this a bad idea?

    My 401a from fellowship has a number of Vanguard index funds so I believe the money there is useful to keep as is (and redistribute as I understand more about what I would like for an asset allocation). The Principal account, however, really seems to be higher expense comparatively.

    Thanks for your help and advice!

  • #2
    Originally posted by Vgadd View Post
    I have never done a backdoor Roth before and, if my understanding is correct, I can contribute $6k for my spouse and for me in both December 2019 and again in January 2020.
    yes, you can contribute each year for each spouse as long as one of you has earned income.

    Originally posted by Vgadd View Post
    Can I transfer my 401k money (17.5k) to a traditional IRA and then convert this to the Roth IRA to perform the backdoor? Is this a bad idea?
    you can rollover the 401k to an IRA and convert it, yes. you pay tax at your marginal rate.
    its only a bad idea if your marginal bracket is high.
    it sounds like you already make enough to need a backdoor rIRA, so you are either 24% or higher.
    it might still be the correct idea, but you have to realize future projections and expected marginal rate at withdrawal.

    Originally posted by Vgadd View Post
    My 401a from fellowship has a number of Vanguard index funds so I believe the money there is useful to keep as is (and redistribute as I understand more about what I would like for an asset allocation). The Principal account, however, really seems to be higher expense comparatively.
    you can also just wait the year and move it to your new employer plan assuming it is better.


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    • #3
      Thanks for your reply! I'm in the 35% bracket so it sounds as if it might be beneficial to hold off for now.

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      • #4
        If the employer only matches certain portion of 401k contribution, when it’s rolled over to Roth, will they match that as well ?

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        • #5
          match is always pretax.

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