Question re: converting 401k to Roth IRA

[Lisa99]

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?

[kaneohe]

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.

[Animorph]

Quote:

Originally Posted by kaneohe 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.

[Onward]

I think kaneohe nailed it.