Jibberishjoeb t1_iud0ake wrote on October 30, 2022 at 12:06 PM

Yours should be able to go to the 401. If you made any contributions directly to it after the initial rollover you’d have to keep that money out of the 401 bc it’s not “qualified” ( if I’m not mistaken)

Another thing to look into is the mega backdoor roth. See if your company has a true after tax account, should be able to put in 10k per year, and then roll that out once a year into your Roth IRA so earnings can grow tax free 👍🏻

tastethesaltinthesea OP t1_iud2mi8 wrote on October 30, 2022 at 12:31 PM

Thanks for the advice! I don't think I contributed anything to the IRA after the initial rollover.

My employer does have a mega backdoor roth. Can I do each of these separately? A backdoor and a mega backdoor? The reason I would do both is I have a joint taxable investment account as well. Ideally, I think I would want to move that through the backdoor roth and then I could also contribute salary through the mega.

If I use the joint taxable account, I assume I could sell 6K each for my wife and I, fund the IRA and do backdoor? Is that correct? Any issues with that?

HandyManPat t1_iudjfyz wrote on October 30, 2022 at 2:50 PM

If your employer's 401k plan offers a Mega Backdoor Roth option it seems to me you have misaligned priorities, particularly tax-wise.

I say this because you seem fixated on paying taxes to convert your spouse's $22k Traditional IRA to Roth IRA this year -and- to potentially triggering capital gains from the brokerage account to fund "only" $12k in Roth IRA, all the while you easily have twice that Roth space available to you in the unfunded After-Tax 401k bucket.

By all means, perform the reverse rollover of your Rollover IRA to Traditional 401k. No tax impact, good investment choices, and low fees, plus it opens you up for the Roth IRA.

But why not spread the spouse's tax IRA conversion over one or multiple years while you ramp up and ultimately max out your MBDR After-Tax 401k option that is currently unused? Unless you anticipate jumping into a much higher tax bracket in the next year or two, I don't see the benefits of doing all of this by the end of 2022, just to get an extra $6k into one of your Roth IRAs.

tastethesaltinthesea OP t1_iudnoem wrote on October 30, 2022 at 3:20 PM

Those are great points. I feel really behind on understanding investments, taxable and non-taxable etc. I have a number of investments in Edward Jones (I know....) and I am really frustrated by EJ. Trying to get everything out of there. My EJ taxable accounts have the money in CWGIX and crap like that and I am just starting to understand tax efficient/inefficient mutual funds. Based on my research, CWGIX is not tax efficient and shouldn't be in a taxable account (after getting walloped by a big CG hit from this account last year).

So, I am trying to figure out how to get all of this money out of EJ and at the same time make it more tax efficient. I was planning to do 1) move it to Vanguard 2) sell the American funds junk and put into VTI, etc. I was thinking that getting it out of taxable accounts would also help. Maybe I am over-thinking but based on my last CG tax impact from my taxable account, I think that is going to seriously cut into my growth.

So, ultimately I am less concerned about the 22k and more concerned about reducing what is in my taxable account.

FYI, I am about 10 years away from retirement - hopefully.

Jibberishjoeb t1_iud3512 wrote on October 30, 2022 at 12:36 PM

Sounds like that would work and yes you can do both……. As long as you convert her whole trad Ira first, doing the backdoor roth while having a balance in the trad is a mess and not fun.

Before you do anything, crunch all the numbers just for good measure.

👍🏻