Backdoor Roth is a strategy that some high income earners engage in, which allows them to still get money into a Roth IRA, even though they have income above the normal limits for direct Roth contributions.In reference to the comment regarding a BackDoor Roth IRA option, my Fidelity advisor said that converting my wife's 401K's into a traditional IRA at Fidelity via rollover would not limit our flexibility to convert some of those funds next year to Roth if we chose to do so. I don't fully understand the difference between Roth Conversion and a Back Door Roth - is one better than the other? And why does leaving my 401K where it is give me that flexibility whereas rolling it over I assume would not?
Thanks.
If your income is not above the Roth limits for a direct contribution, then it's moot.
More details here: https://www.bogleheads.org/wiki/Backdoor_Roth
The "gotcha" is what's known as the pro-rata rule, which considers IRA balances, but not 401k balances. So, some people who are using the backdoor Roth strategy will leave money inside the 401k wrapper so that it stays out of reach of the pro-rata rule.
All of this is discussed in the wiki page above.
Roth conversions are a different animal.
More detail here: https://www.bogleheads.org/wiki/Roth_conversion
Regards,
Statistics: Posted by retired@50 — Tue Jul 09, 2024 10:02 am — Replies 7 — Views 242