Here for the thread title. I’d give it an A+ but I think @colonelsmoothie doesn’t value grades.
Snickering as I read while ignoring the word Roth.
This isn’t available with all employers, so first step is to check with the employer, or read plan documents, to determine if this is even an option.
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That is true. And if I couldn’t do the rollover and thought I had only about 6 years left until retirement, I wouldn’t bother with a Backdoor Roth at all.
I have more dumb questions, lol.
My traditional IRA is all pretax money, it was a rollover from an old 401k. Given that, is there still a need to push it back into a 401k here? Outside of my brokerage, my nest egg is all qualified pretax dollars.
Let’s say I move it to a 401k. And let’s say I have $1M in the 401k and I’m looking for a flat $40k income (ignore COL / inflation adjustments). So I quit my job, and then I transfer $40k from the 401k to a trad IRA, and then immediately convert it to Roth? And then repeat every year until the ladder extends to age 59.5?
I don’t think we have to worry about that.
You only need to do that if you are interested in doing Backdoor Roth contributions from now until retirement. Since you’re going to have enough in your taxable brokerage to provide the 5-year runway of $40k a year (in your example), you don’t really even need to mess with a Backdoor Roth if you don’t want to. I mean it may or may not be the “tax optimal” thing to do, but will it move the needle much? Probably no. At 6 years of contributions, you’re only talking $40-50k of Roth money. You could just put all that in your brokerage and call it a day.
I feel like we need a flow chart here. LOL. Basically, you need to decide if a Backdoor Roth is worth the trouble in your particular situation. If so, then you want to roll over the traditional IRA to your 401k first. If not, you can leave the traditional IRA alone.
Either way, a Roth conversion ladder will work the way you laid out above.
True, but most will let you do this. They want their 401K administrator to have the highest possible AUM to get the lowest possible fees, so it’s kind of bad Benefits Admin policy to not allow it.
That said, employers are not required to allow it and a few don’t.
Huh?
I got the sense that he’s retiring 20 years only and has enough in his brokerage to cover 5 years, but not 20.
If he wants Roth to cover part of that gap, then he absolutely should backdoor Roth.
And the advantage of that is flexibility. He can set up a SEPP on the 401K to cover necessities and then take extra amounts from his Roth IRA to cover extra spending if and when the need arises. But to do that he needs to have actual money in a Roth IRA.
He’s going to do a Roth conversion ladder and his taxable brokerage is going to be large enough to cover his expenses the first 5 years. He will convert $40k (ignoring inflation) each year and after living off the taxable brokerage for the first 5 years, he can start living off the Roth. None of this hinges on a Backdoor Roth or SEPP.
I think we are mostly on the same page but for terminology. I would need to do a ‘Roth ladder’ which requires Roth conversions. But it’s maybe not technically a ‘backdoor Roth’ because I’m not creating IRAs just to convert to Roth to skirt the income caps on Roth.
Yeah, the ladder strategy would work too. I thought you were wanting to get money into a Roth now, before you retire.
But maxing out the pre-tax while your income is high and then converting to Roth as you go after you retire is also a good strategy, and probably more tax efficient.
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Thanks all, I think my strategy for the time being will be to continue building up the brokerage account. I’m maxing my 401k and HSA, of course. I think the goal will be to get brokerage up to where it would cover me for five years (with a cushion).
Then quit the job in (say) Dec 2025, making my 2026 income roughly zero. And that lets me do a Roth conversion in a year with low income (2026), so I get a better tax rate than trying to convert now.
Biggest contingency is whether or not my company goes public. I have a fair amount of stock options, so if we do IPO, and if the price is close to current valuation, it’ll shave a few years off my schedule. Fingers crossed.
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2025 retirement sounds nice
I’m not betting big bucks on it, but we are one step closer to BBB. Now 
to see what the Senate does with it.
I previously paused my post-tax contrib% and will convert the balance to Roth by year-end. If the bill doesn’t pass or the provision gets dropped, I can start it back up next year if I don’t need the liquidity.
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And it’s OK, because HE’S ON A BREAK!!!
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