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Fenderstratguy t1_ja9z190 wrote

Did you roll a previous 401K into traditional IRA with Fidelity? If you get to the point where you make too much to contribute to a Roth IRA, you don't want any money in a traditional IRA. Otherwise you have to use the PRO RATA rule to do a backdoor Roth, and you would likely have to pay taxes on that.

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canyonero__ OP t1_jaa0gyi wrote

Yes I rolled a previous job 401k into the fidelity account. They sent me a check and I opened the account on fidelity with it. Then it sat without positions for a couple years before a random comment on here helped me realize my mistake. For my purposes though there isn’t anything wrong with having both a traditional and a Roth?

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Fenderstratguy t1_jaa65vi wrote

These are the 2021 limits for contributing directly to a Roth IRA: if you made above 125,000 MAGI filing single, or above 198,000 MAGI filing jointly, then you could not contribute to a Roth IRA anymore. However there is a process called a backdoor Roth that lets you first put your $6000 - $7000 into a traditional Roth, then you transfer it into the Roth IRA. The issue is if you have money in the traditional IRA, then you will have to pay tax on a portion of the conversion (the PRO RATA rule). If you had rolled over your prior 401K into your current 401K then no worries about the pro rata rule.

There is absolutely nothing wrong with having assets in the 401K, the traditional IRA, and in a Roth IRA. You have flexibility there. But it does complicate contributing to a Roth IRA for high earners.

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