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Have you accounted for contributions to 401k?

I have not. I only started contributing to a401k this year. Is that included in the limit calculation?

No, they mean that maybe your MAGI doesn’t put you over the limit. If it does, recharacterize this year’s Roth contributions as traditional and convert all of your traditional assets, if the taxes on any earnings and deductible contributions make sense.

Https://www.whitecoatinvestor.com/fix-backdoor-roth-ira-screw-ups/

Ah because it would lower my tax liability, understood. I don’t think it will but I’ll run the numbers. I’ll look into recharacterizing with my chosen financial institution, as well.

Thanks very much!

Thank you. I noticed the cited MAGI figure in your source was listed at 137k for 2019. I don’t exceed that value. Is there an official source for this value somewhere?

You’re welcome! Are there existing SEP/SIMPLE/rollover/traditional assets? If not, the backdoor may be a no brainer.

https://www.irs.gov/newsroom/irs-announces-changes-to-retirement-plans-for-2022

Contributions start to phase out at 129

No, I’m still quite green with contributions. Only contributed to Roth the past two years and last year I was making much less.

So recharacterize and convert the entire account once it’s collected. You’ll expect to pay tax on the attributable gains that will move over to the traditional IRA. Next year you’ll contribute directly to the traditional and convert as soon as you can.

Got it. Unfortunately I do exceed that and thus cannot just disregard this issue as I initially hoped when reading that paragraph, lol.

Thanks very much!

Backdoor Roth is easy.

Contributing to a 401k also lowers you magi if you do that

Thank you. When you say convert as soon as you can, does that imply I convert as soon as I have maxed that years contribution limit or is there some type of schedule you have to follow.

Thanks again and apologies for my ignorance!

You’re fine. Assuming you think your investments will go up, you convert as soon as each contribution collects. That way, there are no earnings to pay tax on - they accumulate in the Roth instead. If you forget or don’t have time, convert that contribution when you think of it or after the next one.

Thanks! So I could technically just contribute enough to my remaining 401k deductions to lower my MAGI enough to avoid the 129k limit. Hmm, I may just do that.

Much appreciated!

Yup

Hence the point of the Roth, understood. If I may ask one last question, would you consider it a wise strategy to attempt to increase my last remaining 401k deductions for the year (currently contributing very minimally, like $50 a paycheck) enough to lower my MAGI below the Roth limit? I’m really only a couple thousand over and I think it’d be less effort, both now and moving forward, to attempt that approach.

I’m curious to hear your thoughts if you don’t mind and could spare the time.

Thanks again, very much appreciate your input!

Getting more money in tax-advantaged space is generally a good idea! If you can afford to do that and this is a good reminder, go for it!

Perfect, thanks again. Have a wonderful day!

You’re welcome! You too!

Are you referring to your gross salary or your after tax salary?