Am I crazy in thinking that there’s no real value in contributing to a traditional IRA with after-tax money when your income exceeds the deductibility income limits? We also cannot do backdoor Roth out of this IRA account due to the existence of another IRA account that contains rolled over pre-tax dollar from a prior workplace 401k plan. So, I assume non-deductible traditional IRA contributions where there is no backdoor Roth game plan is even less useful than a taxable brokerage account due to the tax treatment of the earnings withdrawn from a non-deductible traditional IRA…. Am i thinking about this right?
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Gena Yoo
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7 replies
Replies (7)
scmattd
3 months ago
You might be able to move the pretax Ira into the new workplace 401k and then resume backdoor Roth conversions.
Westie
3 months ago
I could maaaaaybe see a use case in "front loading" future backdoor IRA contributions. At some point, you might be able to get rid of that pesky traditional IRA with deductible contributions, hopefully by rolling it into a 401k. At that point, you could convert all of your previous nondeductible traditional IRA contributions to Roth without paying taxes. You will still owe taxes on the gains in that time, though. Probably not worth it, but it's a consideration.
diredesire
3 months ago
Assuming you're still currently employed at an employer with a 401k, are you able to roll the IRA account into the existing 401k? Some plans allow this, and would unlock a backdoor for you.
NickCincyFI
3 months ago
Yup. If there is truly no Backdoor Roth, I would go to a taxable brokerage account. Pick up the book: Tax Planning to and Through Early Retirement if you want to dive deep on some of these nuances. It's been super helpful
Roberto Sánchez
3 months ago
Given the circumstances that you describe, a non-deductible Traditional IRA contribution sounds like more trouble than it is worth.
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