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Old 07-18-2013, 05:06 PM   #1
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I had a calendar reminder pop up today related to retirement financial planning that said "do not roll 401k into IRA until all Roth IRA conversions are done...major tax implications."

Unfortunately I failed to link to the article or reference material that told me why I need to do this. Can anyone either explain at a high level or point me to reading material on my cryptic note?
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Old 07-18-2013, 05:45 PM   #2
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The usual time that you would get affected is if you were doing "back door" Roths. If your income is too high to allow a direct Roth contribution, you could make a non-deuctible TIRA contribution and then do a Roth conversion.
Unfortunately, if you have other deductible TIRA contributions or rollovers like a 401K rollover, your Roth conversion will be considered to be a pro-rata conversion of the 2 components .......both deductible and non-deductible.
The deductible portion will be taxed and if the deductible portion will be increased by a 401K rollover.

You can google back door Roth and find a ton of articles.
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Old 07-18-2013, 09:45 PM   #3
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Quote:
Originally Posted by kaneohe View Post
The usual time that you would get affected is if you were doing "back door" Roths. If your income is too high to allow a direct Roth contribution, you could make a non-deuctible TIRA contribution and then do a Roth conversion.
Unfortunately, if you have other deductible TIRA contributions or rollovers like a 401K rollover, your Roth conversion will be considered to be a pro-rata conversion of the 2 components .......both deductible and non-deductible.
The deductible portion will be taxed and if the deductible portion will be increased by a 401K rollover.

You can google back door Roth and find a ton of articles.
+1.
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Old 07-18-2013, 10:41 PM   #4
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I think kaneohe nailed it.
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