My employer's 401K plan allows for after-tax contributions with an in-plan roth conversion. I've already maxed out my pre-tax contribution and want to make after-tax contributions. I have an existing rollover IRA from previous employer plans as well as a Roth IRA (also maxed out). Would the Pro Rata rule apply here?
Tax implications of mega backdoor conversion with existing IRAs
byu/HotelImportant7376 inpersonalfinance
Posted by HotelImportant7376
3 Comments
No they are completely separate from each other. On a side note though you could potentially roll your IRA into your 401k so you can do regular backdoor Roth contributions
Pro rata has nothing to do with mega backdoor Roth.
It only matters if you have money in Traditonal/rollover IRA and are doing the regular backdoor roth. You need those to be at $0 by the end of the year you do the Backdoor Roth.
And if your income is below the Roth IRA limit ($150-163k), then you don’t need to do the Backdoor Roth, so theres no issue anyway.
For the mega, its not an IRA, and gets rolled over directly to a Roth IRA, so theres no issue with prorata.
No.
The pro-rata rule thing that gets talked about often is for the regular plain old ordinary Backdoor Roth strategy for *IRAs*.
The Mega Backdoor Roth strategy for 401ks is not subject to that rule.