Tiago Splitter wrote:XxSpyKEx wrote:Ahh, okay, so as long as you didn't put money into a traditional IRA account, you won't get hit with additional taxes, even if you have $250k in a previous employer's 401k plan and $100k in a Roth IRA plan (both from the prior career)? If that's the case, backdoor IRA should be pretty doable for most people (i.e. why would anyone ever put any money into a traditional IRA account, when you could simply put the money into a Roth IRA/backdoor the money into a Roth IRA? Only thing I can think of is if the tax rules have changed and people invested into a traditional IRA before backdoor Roth IRA was available).
Until 2010 no one with an AGI over 100k was allowed to do a Roth conversion so this tactic is fairly new. The issue of having pre-tax money in an IRA will normally only affect people who are a little older and/or who participated in a qualified plan through their employer but then left that employer and rolled the money into an IRA. As was mentioned before you often roll your pre-tax money back into an employer plan, but not all plan sponsors allow for this.
Interesting. So if you have a quarter million in a traditional IRA, you'd basically be getting taxed twice on that $5,500 (since 98% of your IRA would be pre-tax money) to backdoor $5,500 into your Roth IRA. That makes sense why people with a significant traditional IRA (from a prior career) wouldn't want to try to backdoor money into Roth IRA (unless they could roll the traditional IRA money into an employer sponsored plan before doing the Roth conversion).