Retirement/taxes (Calling Spiritrider)

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  • Avatar SLC OB 
    Status: Physician
    Posts: 559
    Joined: 06/23/2018


    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?


    #232570 Reply
    Avatar Peds 
    Status: Physician
    Posts: 4410
    Joined: 01/08/2016

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

    Or move to accepting qualified plan.

    #232572 Reply
    Avatar jacoavlu 
    Status: Physician, Small Business Owner
    Posts: 2374
    Joined: 03/01/2018

    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.

    The Finance Buff's solo 401k contribution spreadsheet:

    #232580 Reply
    Avatar spiritrider 
    Status: Small Business Owner
    Posts: 1903
    Joined: 02/01/2016

    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.

    #232582 Reply
    Avatar SLC OB 
    Status: Physician
    Posts: 559
    Joined: 06/23/2018

    Thank you everyone!

    #232748 Reply
    Liked by Tim

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