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Pro-Rata Rule: If you have other pre-tax IRAs, you may owe taxes on part of the conversion. ... with a traditional IRA you must take required minimum distributions at age 73. A backdoor Roth IRA ...
For example, say that you have $1 million in an IRA and $500,000 in a Roth IRA (a 2/1 ratio). If you withdraw $60,000 in a given year, you would have to take $40,000 from your traditional IRA and ...
Now she wants to convert $25,000 to a Roth IRA. Using the pro-rata rule, the nontaxable portion of that conversion would be $6,250 (25% x $25,000), and the rest would be added to her taxable ...
Under the 5-year rule, the entire account balance must be withdrawn over a 5-year period. The rule does not require a certain amount each year, or an even division between the five years. However, with the 5-year distribution method, the entire remaining balance becomes a required distribution in the fifth year.
Whether you already have both pre-tax and after-tax amounts in the account, making distributions subject to the IRS pro-rata rule. To sum up, with a mega backdoor Roth, you can contribute up to an ...
Can be converted to a Roth IRA, typically for backdoor Roth IRA contributions. Taxes need to be paid during the year of the conversion. Also, the non-basis portion can be rolled over into a 401(k), if allowed by the 401(k) plan. Changing Institutions Can roll over to another employer's 401(k) plan or to a rollover IRA at an independent institution.
Beware the pro-rata rule on conversions If you have traditional IRA accounts with deductible contributions, you’ll need to factor that in if you convert any nondeductible amounts into a Roth IRA.
Image source: Getty Images. 1. Required minimum distributions no longer apply to Roth 401(k)s. If you decided to save in a Roth 401(k) instead of your employer's tax-deferred 401(k) option, you ...