My 61 yo husband recently left his job and has the current retirement accounts (for the purpose of this post, I’m leaving out our taxable and my retirement accounts):
Schwab PCRA 401(k) = 550K (pre-tax contributions) + 6K Roth (post-tax contributions & conversions)
Schwab Roth IRA = 30K contributions (post-tax and backdoor)
Schwab Roth Rollover = 200K previous conversions from 401k
Schwab tIRA = 0 balance (previous balance was converted to Roth)
Goals:
1) Get the Schwab PCRA 401(k) rolled out of the employer account to a rollover IRA so he can have access to a wider range of investments (ie. individual bonds vs bond funds).
2) Start Roth conversions in 4 years (Medicare age); prioritizing low MAGI for ACA subsidies until then.
3) Start his Social Security at age 70; start mine next year at 62.
4) Avoid tax complications.
Questions:
1) Schwab says they can only do a one-time full distribution, but they are able to split the distribution into different target accounts so I’m assuming we can roll over 550K from 401(k) to IRA and roll over 6K from Roth 401(k) to Roth IRA. Am I correct in thinking there should be no glitches and/or tax complications with this scenario?
2) Should the 550K rollover go into the existing tIRA (with zero balance) or should he open a new IRA for this transaction?
3) He may do 1099 consulting in the future. In trying to interpret the (confusing) pro rata rule, I'm assuming that as long as he avoids making any backdoor Roth contributions he will avoid the pro rata hit. So say he earns above the Roth income limit, he’ll skip making a backdoor Roth contribution that year. If he makes below the income limit (more likely), he’ll make a regular Roth contribution that year. Am I understanding it correctly?
4) Will we encounter any issues with Roth conversions in the future?
5) Are there any other concerns we should be aware of?
Thank you in advance!
Schwab PCRA 401(k) = 550K (pre-tax contributions) + 6K Roth (post-tax contributions & conversions)
Schwab Roth IRA = 30K contributions (post-tax and backdoor)
Schwab Roth Rollover = 200K previous conversions from 401k
Schwab tIRA = 0 balance (previous balance was converted to Roth)
Goals:
1) Get the Schwab PCRA 401(k) rolled out of the employer account to a rollover IRA so he can have access to a wider range of investments (ie. individual bonds vs bond funds).
2) Start Roth conversions in 4 years (Medicare age); prioritizing low MAGI for ACA subsidies until then.
3) Start his Social Security at age 70; start mine next year at 62.
4) Avoid tax complications.
Questions:
1) Schwab says they can only do a one-time full distribution, but they are able to split the distribution into different target accounts so I’m assuming we can roll over 550K from 401(k) to IRA and roll over 6K from Roth 401(k) to Roth IRA. Am I correct in thinking there should be no glitches and/or tax complications with this scenario?
2) Should the 550K rollover go into the existing tIRA (with zero balance) or should he open a new IRA for this transaction?
3) He may do 1099 consulting in the future. In trying to interpret the (confusing) pro rata rule, I'm assuming that as long as he avoids making any backdoor Roth contributions he will avoid the pro rata hit. So say he earns above the Roth income limit, he’ll skip making a backdoor Roth contribution that year. If he makes below the income limit (more likely), he’ll make a regular Roth contribution that year. Am I understanding it correctly?
4) Will we encounter any issues with Roth conversions in the future?
5) Are there any other concerns we should be aware of?
Thank you in advance!
Statistics: Posted by sodastream — Sat Sep 28, 2024 2:13 pm — Replies 5 — Views 230