|
Max 401k plus do non-deductible IRA?
09-10-2016, 10:53 AM
|
#1
|
Recycles dryer sheets
Join Date: May 2015
Posts: 130
|
Max 401k plus do non-deductible IRA?
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.
|
|
|
|
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!
Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!
You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!
|
09-10-2016, 10:55 AM
|
#2
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2013
Location: Les Bois
Posts: 5,761
|
that's what we do - max 402g limit plus catch up plus backdoor roth
__________________
You can't be a retirement plan actuary without a retirement plan, otherwise you lose all credibility...
|
|
|
09-10-2016, 11:09 AM
|
#3
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2014
Location: Spending the Kids Inheritance and living in Chicago
Posts: 17,098
|
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.
|
|
|
Max 401k plus do non-deductible IRA?
09-10-2016, 11:14 AM
|
#4
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2013
Location: Limerick
Posts: 5,655
|
Max 401k plus do non-deductible IRA?
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!
|
|
|
09-10-2016, 11:19 AM
|
#5
|
Recycles dryer sheets
Join Date: May 2015
Posts: 130
|
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!
|
|
|
09-10-2016, 11:26 AM
|
#6
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,373
|
Quote:
Originally Posted by 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.
|
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.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
|
|
|
09-10-2016, 11:33 AM
|
#7
|
Recycles dryer sheets
Join Date: May 2015
Posts: 130
|
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?
|
|
|
09-10-2016, 12:37 PM
|
#8
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,373
|
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.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
|
|
|
09-10-2016, 12:40 PM
|
#9
|
Thinks s/he gets paid by the post
Join Date: Jan 2006
Posts: 4,172
|
You should read this: https://thefinancebuff.com/the-backd...te-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.
|
|
|
09-10-2016, 01:43 PM
|
#10
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2013
Location: Les Bois
Posts: 5,761
|
Quote:
Originally Posted by 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.
|
well you know what CPA stands for - can't pass actuarial exams
__________________
You can't be a retirement plan actuary without a retirement plan, otherwise you lose all credibility...
|
|
|
09-10-2016, 01:53 PM
|
#11
|
Thinks s/he gets paid by the post
Join Date: Mar 2010
Posts: 1,994
|
Quote:
Originally Posted by 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?
|
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!
|
|
|
09-10-2016, 02:03 PM
|
#12
|
Recycles dryer sheets
Join Date: May 2015
Posts: 130
|
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
|
|
|
09-10-2016, 09:11 PM
|
#13
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,373
|
and an actuary is someone who didn't have enough personality to become an accountant.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
|
|
|
09-10-2016, 10:34 PM
|
#14
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jul 2014
Location: Spending the Kids Inheritance and living in Chicago
Posts: 17,098
|
Quote:
Originally Posted by sheehs1
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.
|
|
|
09-11-2016, 07:13 AM
|
#15
|
Thinks s/he gets paid by the post
Join Date: Mar 2010
Posts: 1,994
|
Quote:
Originally Posted by Sunset
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.
|
|
|
|
Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
|
|
Posting Rules
|
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts
HTML code is Off
|
|
|
|
» Recent Threads
|
|
|
|
|
|
|
|
|
|
|
|
|
» Quick Links
|
|
|