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Based on the article below, it seems that if I roll my 401K (very large) from my former employer into an IRA, I can then no longer take advantage of the “back door ROTH IRA contribution” because I’ll have too much in an IRA and can no longer roll the $6500 ($12000 married) tax free into a Roth.
Is that a correct reading of the pro-rata rule?

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http://www.marketwatch.com/story/pro-rata-rule-and-your-ira-...
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Based on the article below, it seems that if I roll my 401K (very large) from my former employer into an IRA, I can then no longer take advantage of the “back door ROTH IRA contribution” because I’ll have too much in an IRA and can no longer roll the $6500 ($12000 married) tax free into a Roth.
Is that a correct reading of the pro-rata rule?


Yes, the taxability of any Roth conversion is pro-rated based on all of the percent of pre-tax money in all non-Roth IRAs that you, as an individual, own. 401(k) accounts are not included in the calculations. If you wish to continue to take advantage of doing back-door Roth contributions because your MAGI is over the limit to contribute to a Roth IRA, you can (1) leave the 401(k) in your former employer's plan, (2) roll it into a 401(k) at your current employer, or (3) convert the money in the 401(k) to a Roth IRA. IRS Pub 590 also has more details.

AJ
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I can see the first two but because my income is too high the third option would result in crap-tons of taxes..I need to wait until one of us gets laid off or the market crashes to think of that one. Thank you for the reply.
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the third option would result in crap-tons of taxes..

Remember you don't have to convert all of it at one time, though your taxes are probably too high for even partial conversions to be reasonable.
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