alt Hacker NewsI'd love to move the account (especially after this!), but unfortunately I can't because of what is basically an annoying side-effect. My current employer doesn't offer a 401k plan, and the only option I have for contributing to a Roth IRA is via backdoor contributions. Such backdoor contributions (which are basically an IRS-sanctioned loophole) have to start in a Traditional IRA account, and you cannot have any other/pre-existing Traditional IRA funds at the time of the contribution. So, I have nowhere to move the 401k funds besides an IRA account, but I have to leave my traditional IRA accounts empty so that I can do a backdoor contribution.
I wish the federal government would just get rid of the salary cap for direct contributions to a Roth IRA, since they basically already allow it via the obnoxious and convoluted path.
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FYI you can do backdoor Roth contributions even if you already have an IRA with funds in it. It's just more complicated because you have to follow the pro rata rule.
you can create a solo 401k that contains both a traditional and roth account, and roll over from your old employer's 401k to the traditional solo 401k, and do a conversion to the roth account
there are caveats to this, like always being attached to your solo 401k plan makes you ineligible for contributions to an IRA all the time, but you will be able to have rollovers into the IRAs, you also might decide that the solo 401k is a superior product to IRAs in every way
if you are not currently eligible to create a solo 401k, it is very easy to become eligible with a single dollar of 1099 or schedule C income the year you make it, and then it can exist in perpetuity
corroborate that with your licensed professionals. many gurus overlook the solo roth 401k mostly due to SEO and their audience of professionals that associate "401k" with "corporate employer thing", as opposed to something at parity with a traditional and roth IRA and expanded in capability
>the only option I have for contributing to a Roth IRA is via backdoor contributions
Here's a simple idea: roll over your 401k, and then take the $7K (or whatever) you were going to put into the Roth and instead use it to pay the tax on a conversion of $20K. Much bigger bang for the buck.
What the actual f%%%! I just looked it up. Not that I didn’t believe you. I just never looked into it.
For reference for others…
https://investor.vanguard.com/investor-resources-education/a...
I’m both under the limit to contribute to a Roth since I am married and my company offers an “after tax 401K” (different than a Roth 401k) and I’m over 50 so I can do catch up contributions.
I’m a long way before I need to worry about backdoor contributions.