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Retirement/taxes (Calling Spiritrider)

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  • Retirement/taxes (Calling Spiritrider)


    Doing the Mega Backdoor Roth with my husbands account... we haven't asked for those after tax contributions to be moved over in a while (maybe 6 months) and are doing that this morning. He has $11.8K to move but it has earned $140. They say we can't leave that $140 in his 401a and that it would need to be moved to either the Roth (which would cause tax implications) or to his traditional Roth (which we have already done our $6 backdoor Roth, so that would be overfunding his Roth.

    Thinking I need to just cause the tax issue for his Roth IRA and put the whole amount there... thoughts?


  • #2
    You convert, pay tax on the earnings, and move it all.

    Or move to accepting qualified plan.


    • #3
      In plan Roth rollover or rollover to Roth IRA are both fine and both result in tax on $140.

      There is no overfunding of Roth IRA doing this. It’s conversion and not contribution.

      Some plans allow a split rollover of after tax going to Roth and earnings going to traditional IRA. Then traditional IRA can be rolled back into the plan. This is the only way to not pay tax now on conversion of the pretax earnings. But to me that seems not worth the hassle when it’s $140. Just get it all to Roth.


      • #4
        There are dozens of WCI forum members who can answer these types of questions just as well as I can. @Peds has already given a concise answer.

        Rollovers do not affect any contribution limits, but any pre-tax balances in all traditional, SEP  and SIMPLE IRA accounts on 12/31 will be subject to pro-rata taxation.

        If you can not rollover the employee after-tax earnings from the IRA to a qualified plan by 12/31, you might as well do a rollover of both the contributions and earnings to a Roth IRA.


        • #5
          Thank you everyone!