Back-Door Roth Contribution and 403(b) rollover in same year - taxation questions | Ed Slott and Company, LLC

Back-Door Roth Contribution and 403(b) rollover in same year - taxation questions

Can someone who is over the income limit for roth contributions do a back-door roth conversion, and rollover their 403(b) plan to a TIRA later in the same year, and avoid paying pro-rata taxes on the back-door roth conversion?

No, the 403b rollover would have to be postponed until the following year to avoid pro rating.  If back door conversions are planned for several years, one possibility to avoid pro rating would be to either keep the 403b in place or roll it into a new employer plan if taxpayer has changed jobs. Another thing to consider if the 403b plan has high costs or limited investment options and rollover to another employer plan is not possible, is whether a tax free back door conversion is worth paying the high costs of the 403b plan.

 

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