Im in my mid 20’s. I have had a 401k ever since my first job at 18. I rolled it over to a traditional IRA when i left my old employer. Now i opened a new 401k with my new employer, of course.
I decided to open a Roth IRA (for my personal investing) because I prefer that over a traditional IRA, and I will be hitting the yearly maximum going forward.
Do people leave their traditional IRA alone because they’re almost always going to have a traditional 401k that they roll into their traditional IRA?
Edit: Yes, all my funds are actively being invested.
401k, Roth IRA, Traditional IRA
byu/Odd_Highlight215 inpersonalfinance
Posted by Odd_Highlight215
3 Comments
You can leave it alone, just be aware that if you ever try to do a “backdoor” Roth in the future your IRA can become a liability, as you’ll be subject to the pro rata rule.
https://www.sdocpa.com/pro-rata-rule/
I generally leave my traditional IRA alone, yes. I usually opt for Roth outside of that when I have the option. The tax-free growth and having access to contributions penalty-free has been really nice. Also want to have as much of what I leave to my kids in a Roth as possible.
It depends on your income.
If you make too much to contribute to Roth IRA (~$163k), then you do not want any money in Traditional IRAs. So you can do the Backdoor Roth IRA.
So in that case, if you need that now or plan to in the future, you want to keep all Traditional money in 401k space, not IRA.
Its also generally good to rollover into current 401ks. Just to consolidate.
Roth doesn’t matter as much, you can rollover Roth money to a Roth IRA without any issues.