In this video we’ll breakdown how to navigate conducting a Back Door Roth IRA when you already have an existing Pre-Tax IRA on the balance sheet. Normally pro-rata aggregation rules would prevent you cleanly conducting a back door roth ira without taxes.

00:00 – Intro
01:48 – Ways to fund IRAs
04:42 – Back Door Roth IRA
07:52 – Aggregation of an Existing IRA
12:25 – Timing of Rollovers, Contributions, and Conversions
16:15 – Calls to Action

Kitces Article w/ Steven Jarvis –

IRC Section 408(d)(3)(A)(ii) -…(read more)

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A Back Door Roth IRA is a strategy that allows high-income earners to convert their traditional IRA funds into a Roth IRA, thus taking advantage of the tax benefits that come with a Roth account. However, for individuals who already have a traditional IRA, there are aggregation rules that need to be followed in order to successfully execute a Back Door Roth IRA conversion.

The aggregation rules stipulate that when converting traditional IRA funds to a Roth IRA, all of an individual’s traditional IRA accounts must be considered. This means that if an individual has multiple traditional IRA accounts, the aggregation rules require that all of the accounts be taken into account when calculating the tax implications of a Back Door Roth IRA conversion.

For example, if an individual has a traditional IRA with a balance of $50,000 and a separate traditional IRA with a balance of $30,000, the aggregation rules require that the total balance of both accounts, $80,000, be considered when calculating the tax liability of converting funds to a Roth IRA.

One way to navigate the aggregation rules when executing a Back Door Roth IRA conversion with an existing IRA is to consider rolling over all traditional IRA accounts into an employer-sponsored retirement plan, such as a 401(k) if available. By doing so, only the non-deductible contributions made to the traditional IRA would be converted to a Roth IRA, thus minimizing the tax implications of the conversion.

It is important to note that individuals considering a Back Door Roth IRA conversion with an existing IRA should consult with a financial advisor or tax professional to ensure they fully understand the aggregation rules and the potential tax implications of the conversion. Additionally, individuals should consider their unique financial situation and long-term goals before making any decisions regarding a Back Door Roth IRA conversion.

In conclusion, the aggregation rules must be carefully considered when executing a Back Door Roth IRA conversion with an existing IRA. By understanding and following these rules, individuals can successfully take advantage of the tax benefits that come with a Roth IRA while minimizing any potential tax liabilities.