Max 401k plus do non-deductible IRA?

[YakGrl]

I am currently maxing out 401k contributions. I am over 55 and planning to retire in the next few years. My income is too high to do a Roth.
I believe I can make a $6500 non-deductible traditional ira with Vanguard and then do a conversion to Roth shortly after that. Can you please confirm that is allowed? I'm trying to get as much as possible into Roth for retirement.

 

[Big_Hitter]

that's what we do - max 402g limit plus catch up plus backdoor roth

 

[Sunset]

Yes, if you have other IRA's (that were tax deducted) the calculation is a bit more complex (I think) but you can do it.

 

[Dash man]

Yes, we both maxed out our 401k plans and did backdoor Roth contributions in the years before retirement. I was also allowed by my 401k plan to contribute additional after tax money up to a total contribution of $25,000 per year. I believe IRS rules are $50,000, but plan rules dictate the maximum. This after tax money was rolled into my Roth when I left the company along with my Roth 401k contributions and gains. Traditional 401k money went into my traditional IRA.


Enjoying life!

 

[YakGrl]

Thank you for the quick reply. I thought it was allowed, but asking tax prep cpa didn't get a clear answer. Probably time to get another cpa.
Sorry if I am not replying in the correct way. This is my first time posting. I have been reading and lurking for about a year!

 

[pb4uski]

I am currently maxing out 401k contributions. I am over 55 and planning to retire in the next few years. My income is too high to do a Roth.
I believe I can make a $6500 non-deductible traditional ira with Vanguard and then do a conversion to Roth shortly after that. Can you please confirm that is allowed? I'm trying to get as much as possible into Roth for retirement.

You can do it but if you have deductible IRA money then a portion of your conversion would be taxable income so if you have deductible IRA balances then it is not a good idea.

If you have deductible IRA money then I think you would be better off to just do taxable investing with the extra funds... simpler and still tax preferenced if you invest in equities that generate qualified dividends and LTCG.

 

[YakGrl]

I have all my investment accounts with Vanguard. My company 401k (lucky they were early in getting us this benefit!), I have a taxable investment account. Plus I have a Roth account and Roth brokerage account accumulated from earlier years.
I think I could contribute to a new account non-deductible ira, and then convert to a Roth?

 

[pb4uski]

Yes, since you don't have and IRAs other than your Roth then I think that would work. Vanguard can confirm or refute and will help you through the process.

I think it will be as easy as setting up an IRA, transferring $6,500 from your taxable account to the IRA, and then rolling over the $6,500 from the IRA to your Roth IRA. You may need to leave some minimum balance in the IRA to keep it active and avoid fees, but ask Vanguard on that.

 

[kaneohe]

You should read this: https://thefinancebuff.com/the-backdoor-roth-ira-a-complete-how-to.html

esp. the section on hiding your IRAs. Check w/ employer to see if your 401K will accept your deductible part of your TIRAs.......if you don't have any TIRAs, then don't worry about this.

 

[Big_Hitter]

Thank you for the quick reply. I thought it was allowed, but asking tax prep cpa didn't get a clear answer. Probably time to get another cpa.

well you know what CPA stands for - can't pass actuarial exams

 

[sheehs1]

I have all my investment accounts with Vanguard. My company 401k (lucky they were early in getting us this benefit!), I have a taxable investment account. Plus I have a Roth account and Roth brokerage account accumulated from earlier years.
I think I could contribute to a new account non-deductible ira, and then convert to a Roth?

That had been my plan. I contribute to a SIMPLE IRA and have a ROLLEROVER IRA from employment. I was searching for other ways to defer money. I have been contributing to a non-deductible IRA for quite a while now...over 8 to 10 years (I think) with the thought of converting to a Roth. However, I DO have other deferred IRA'S and found out (too late) I would have to take the value of all IRA's into the calculation and pay taxes if I wanted to convert it to a ROTH. So I haven't done it.

I still contribute since it is still deferred taxes on it. Good luck. Sounds like you may not have the same issue.

Expect "others" to look at you like "huh?". They are not used to dealing with Non-deductible IRA's!

 

[YakGrl]

Thank you everyone. It looks like I am ok to do this in the process that Pb4uski outlined. Staying within Vanguard should help the process. I appreciate all the knowledge shared in this forum. I will also read further on the thread that was recommended.
I am very lucky to have had the options available that I have had, but I wish I had learned more about Roth earlier in my career.
This forum is a great resource!
I am looking forward to FIRE

 

[pb4uski]

well you know what CPA stands for - can't pass actuarial exams

and an actuary is someone who didn't have enough personality to become an accountant.

 

[Sunset]

That had been my plan. I contribute to a SIMPLE IRA and have a ROLLEROVER IRA from employment. I was searching for other ways to defer money. I have been contributing to a non-deductible IRA for quite a while now...over 8 to 10 years (I think) with the thought of converting to a Roth. However, I DO have other deferred IRA'S and found out (too late) I would have to take the value of all IRA's into the calculation and pay taxes if I wanted to convert it to a ROTH. So I haven't done it.

I still contribute since it is still deferred taxes on it. Good luck. Sounds like you may not have the same issue.

Expect "others" to look at you like "huh?". They are not used to dealing with Non-deductible IRA's!

You might be able to open a self-401K plan, roll your deductible IRA's into it, then you are left with just the non-deductible IRA, which you can roll into a ROTH.
You will have the issue of the gains the non-deductible IRA which are taxable but the contribution amounts won't be.

Later whenever you want you can rollover the self-401K to an IRA if you wanted or leave it since you will control it.

 

[sheehs1]

You might be able to open a self-401K plan, roll your deductible IRA's into it, then you are left with just the non-deductible IRA, which you can roll into a ROTH.
You will have the issue of the gains the non-deductible IRA which are taxable but the contribution amounts won't be.

Later whenever you want you can rollover the self-401K to an IRA if you wanted or leave it since you will control it.

Thank you Sunset! I will definitely look into this. I don't/can't make contributions to my ROLLOVER IRA but do to my SIMPLE. For this reason I thought I had to keep them separate.