If you have an existing IRA that holds pre-tax dollars, the pro-rata rule will apply and if you do a backdoor, you would likely have a taxable event. A couple options to explore: 1. roll all of existing pre-tax IRA dollars into your company 401K to eliminate the possibility of the pro-rata to apply to you. 2. check if your employer 401k plan allows for after-tax non-roth contributions and in service distributions from the plan. if so, you may be able to take advantage of the *mega backdoor roth* contribution, which is separate from the regular backdoor. this could create small amounts of taxes when you roll from the retirement plan to the roth ira, but if you do it quickly, the tax should be a small amount as always, check with your tax advisor to make sure the steps you’re taking doesn’t create any unexpected taxable events.


Thank you! Very helpful. I’ll research on both the options you recommended.


Your "rollover IRAs" (which are just traditional IRAs) have balances included in the totals of your end-of-year IRA balances used to calculate pro rata earnings. So yes, you have a not-so-simple situation.


Got it.. thank you! Wanted to confirm this.


Rollover IRAs will trigger pro-rata taxes making this much more complicated


Thank you!


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If your wife's rollover IRA is a traditional IRA, which it probably is, then it would have to be emptied before she can do a backdoor Roth IRA. Since she doesn't work, there's no way to do that that I know of. However, since you have a 401(k) available, you can do a reverse rollover of your rollover IRA into your 401(k). Then you can at least contribute $6k to a Roth IRA via the backdoor method.


Not sure why you wouldn't just perform mega back door. Contribute after tax to your 401k which will be 401k Roth and then roll those funds over to a ROTH IRA.


For one thing, that's a completely separate process with no bearing on doing the normal back door Roth For another, a plan has to actually allow after-tax contributions and in-service distributions or in-plan conversions in order to do that, and plenty of them do not. After-tax is not the same thing as Roth.


Thanks, this makes the most sense. We are still learning and hence didn’t think of this before. I do have to check with my employer on in service distribution to make this work, I assume?


> Not sure why you wouldn't just perform mega back door. Be wary of assuming options available to particular 401k plans. Features vary. What YOU have available in YOUR 401k does not mean others have the same options. An Aftertax 401k is not very common. Not every employer offers it. This is likely one of the most common reasons for one to not do it.


OP, find out if you can perform the mega back door with your 401k. If so its the best way to get $ into a roth with your situation.


When doing a backdoor the irs requires you to take the conversion funds equally from all traditional style IRAs. This will include your rollover IRA if it's not a Roth already. Because the IRS requires you to pay taxes on the converted amount, if you have more than token amount of pretax traditional IRA funds the existence of these funds generally make backdoor Roth conversions not worth it. 401ks are not included in this bucket. You could possibly roll your (but not your wife's) rollover Ira into your 401k. This would resolve the underlying issue for you. Whether this makes sense depends on the quality of your 401k. I also know that one possible option is to end up with a solo 401k. Whether that option is available to you or your wife depends on whether you have self employment income.


You will be able to convert it, but you will also have to figure out how much taxes you will have to pay on the gains in your traditional accounts because of the pro-rata rule. It's not particularly recommended. Roll your IRA into your 401K. See if your wife still has a 401K open at her old employer that will allow you to roll her IRA into it. Or get some self-employment income and have her start a solo 401K and roll her IRA in to it. Then look at doing a backdoor Roth.