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Roth conversions and pro-rata rule
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Date: December 5th, 2025 11:31 PM Author: black at-the-ready athletic conference hospital If I do pretax 401k-> roth conversion , can I do posttax contributions->roth same year or that would trigger pro-rata? Or as long as I don't do them at the same time, no? (http://www.autoadmit.com/thread.php?thread_id=5806858&forum_id=2\u0026mark_id=5085026#49487711) |
Date: December 5th, 2025 11:36 PM Author: concupiscible brunch tattoo i think the only way you run into issues with the pro rata rule is if you hold any pretax money in IRAs. do you?
it's no problem if all your IRAs are roth already |
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Date: December 5th, 2025 11:43 PM Author: black at-the-ready athletic conference hospital I'm switching jobs and plan to do pretax401k->roth. Not sure yet if the conversion is direct or it goes 401k->traditional ira-> roth. If it does touch traditional ira and then immediately converted, would it affect my post tax conversions on the same year? I.e. on january1st I usually put $7000 posttax ira->roth (http://www.autoadmit.com/thread.php?thread_id=5806858&forum_id=2\u0026mark_id=5085026#49487732) |
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Date: December 5th, 2025 11:43 PM Author: black at-the-ready athletic conference hospital I hold pretax only in 401ks (http://www.autoadmit.com/thread.php?thread_id=5806858&forum_id=2\u0026mark_id=5085026#49487734) |
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Date: December 5th, 2025 11:57 PM Author: concupiscible brunch tattoo oh! the pro rata rule is only an issue on IRAs not 401ks. On 401ks, it's no problem at all if you have mostly pretax money in it, but occasionally make an after tax contribution. you can easily call up vanguard or fidelity or whatever, and say i want to convert only the after tax portion to an in plan roth conversion (if supported by your plan) (http://www.autoadmit.com/thread.php?thread_id=5806858&forum_id=2\u0026mark_id=5085026#49487747) |
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Date: December 6th, 2025 12:22 AM Author: black at-the-ready athletic conference hospital In plan conversion not supported. Which is why I'm doing pretax-> outside roth conversion after leaving work (http://www.autoadmit.com/thread.php?thread_id=5806858&forum_id=2\u0026mark_id=5085026#49487802) |
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Date: December 6th, 2025 12:26 AM Author: concupiscible brunch tattoo i bet it's fine if you can roll over your existing 401k with after tax contributions to a new employer 401k plan that offers in plan roth conversions, and do the roth conversion on the after tax contributions piece only.
if you're rolling the 401k into an IRA, i think you get fucked by the pro rata rule because you've got a bunch of pretax money in an IRA. |
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Date: December 6th, 2025 12:38 AM Author: black at-the-ready athletic conference hospital Can I convert directly from pretax401k to roth? And if instead I have to go 401k->ira->roth , then for how long does it trigger pro-rata? I.e. I cannot do any posttax conversions same year or as long as I complete this transaction my ira is 0 again? (http://www.autoadmit.com/thread.php?thread_id=5806858&forum_id=2\u0026mark_id=5085026#49487837) |
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Date: December 6th, 2025 11:40 AM Author: concupiscible brunch tattoo for any money you currently have as pretax/traditional in an IRA or 401k, if you want to convert it into a roth, you're generally going to pay ordinary income rates on the conversion - so if your income is high as a doctor this is generally not going to make sense to do.
the above excludes backdoor roth conversions on an IRA (which if your salary is above the threshold, you make the aftertax contribution and then immediately convert to roth), and mega backdoor roth with aftertax contributions if your 401k plan allows it. but these are usually aftertax contributions, not pretax/traditional which it sounds like you are talking about. |
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Date: December 6th, 2025 11:44 AM Author: black at-the-ready athletic conference hospital Yeah I plan to convert pretax from 401k from old job to roth so I pay tax from savings account but don't pay tax on future gains. I.e. over 20years that account might gain 1million on which I wouldve paid ordinary tax. But I also do posttax backdoor roth and hope this single pretax401k->roth will not mess with my posttax conversions. (http://www.autoadmit.com/thread.php?thread_id=5806858&forum_id=2\u0026mark_id=5085026#49488398) |
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Date: December 6th, 2025 11:48 AM Author: concupiscible brunch tattoo what's your current marginal tax rate? it's hard to imagine it would be lower in retirement, no?
but if you're converting your entire pretax 401k to roth, you're paying the whole amount as ordinary income. this is the situation that people are trying to avoid when they complain about the pro rata rule. if you're happy paying the extra tax to convert everything, it's a non issue |
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Date: December 6th, 2025 1:05 PM Author: black at-the-ready athletic conference hospital I'm in the top tax bracket and in retirement I plan to be in lower tax bracket for whatever new 401k I contribute from now on. If I convert old job 401k to roth I figure paying tax on it is acceptable. I just don't want to be double taxed if I do additional posttax/backdoor roth same year(that's where prorata is a concern). (http://www.autoadmit.com/thread.php?thread_id=5806858&forum_id=2\u0026mark_id=5085026#49488594) |
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Date: December 6th, 2025 1:22 AM Author: Bisexual judgmental heaven The better question is why the fuck are you doing a Roth conversion when you are in the highest tax bracket? That makes zero sense. The only possible justification is if you think tax rates will go up in the future, but it is very doubtful that they will go up enough for this to be a good idea. (http://www.autoadmit.com/thread.php?thread_id=5806858&forum_id=2\u0026mark_id=5085026#49487870) |
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Date: December 6th, 2025 1:38 AM Author: black at-the-ready athletic conference hospital I figured that even if my tax rates are lower in retirement over 20years or 30years that's extra 1million that I can accumulate in taxable income, or I can just pay 50k cash from my savings account now. Basically the further u are from retirement the more you gain from putting money into roth (http://www.autoadmit.com/thread.php?thread_id=5806858&forum_id=2\u0026mark_id=5085026#49487876) |
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Date: December 6th, 2025 11:42 AM Author: concupiscible brunch tattoo it's not intuitive, but my view is that the sole factor on whether it makes sense to do traditional or roth is expected tax rate now vs retirement. for most current lawyers or doctors, it makes sense to fill up the traditional bucket and get the deduction in the current year. and then contribute whatever you can aftertax via backdoor roth IRA or mega backdoor 401k (http://www.autoadmit.com/thread.php?thread_id=5806858&forum_id=2\u0026mark_id=5085026#49488394) |
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Date: December 6th, 2025 11:47 AM Author: black at-the-ready athletic conference hospital Yes that's what I thought and what I plan to do in the future. Exception being old401k is better to convert now and then just accumulate new pretax401k. But I do plan to also do next year solo401k with pretax employer contribution plus after-tax employee->backdoor roth. I'll open custom 401k to do that. (http://www.autoadmit.com/thread.php?thread_id=5806858&forum_id=2\u0026mark_id=5085026#49488400) |
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Date: December 6th, 2025 2:06 PM Author: Bisexual judgmental heaven No, that's not correct. Assuming you invest the money that you would have paid in taxes on a Roth conversion, if your tax rate in retirement is the same as it is now, you will end up with exactly the same amount of money in retirement regardless of whether or not your do the conversion. In other words, it never makes sense to do a Roth conversion if you expect to be in a lower tax bracket in retirement. You will end up with more money if you invest the $50k you would have spent on taxes and then pay the tax later at a lower rate. Now if you would spend the $50k on dumb goy shit rather than investing it if you don't do the conversion, that's another story. But it's not advantageous to pay tax now if you will be in a lower tax bracket later. (http://www.autoadmit.com/thread.php?thread_id=5806858&forum_id=2\u0026mark_id=5085026#49488743) |
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Date: December 6th, 2025 2:40 PM Author: concupiscible brunch tattoo cr (http://www.autoadmit.com/thread.php?thread_id=5806858&forum_id=2\u0026mark_id=5085026#49488820) |
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Date: December 6th, 2025 5:57 PM Author: exciting mildly autistic state Not only that, but you pay into the 401(k) at your marginal tax rate. When you withdraw in retirement, your income in probably substantially lower and will be at least needing to "fill in" the lower tax brackets.
Much of what you put in at the highest marginal rate will therefore be taxed at a lower rate even if you end up in the same marginal tax rate eventually. |
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Date: December 6th, 2025 5:29 PM Author: Fluffy locus it seems entirely conceivable that tax rates in 30 years at the income levels successful white collar types would expect to live on could be higher than the max rates now. (http://www.autoadmit.com/thread.php?thread_id=5806858&forum_id=2\u0026mark_id=5085026#49489270) |
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Date: December 6th, 2025 5:39 PM Author: concupiscible brunch tattoo in that world do you really think the tax raisers will honor the roth promise? (http://www.autoadmit.com/thread.php?thread_id=5806858&forum_id=2\u0026mark_id=5085026#49489309) |
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Date: December 6th, 2025 7:24 PM Author: Idiotic Rambunctious Pisswyrm Fat Ankles Yes, you fucking retard. This is a sacred cow they can’t touch and wouldn’t be enough money to move the needle anyway. (http://www.autoadmit.com/thread.php?thread_id=5806858&forum_id=2\u0026mark_id=5085026#49489626) |
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Date: December 6th, 2025 7:27 PM Author: Cheese-eating puce hominid tiNtcr
They’ll means test that shit in a heartbeat, same as they did with social security without the general public noticing |
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Date: December 6th, 2025 8:36 PM Author: Fluffy locus cr. it is absolutely on the table, although i’d bet on the rates getting jacked way up before it’s implemented. (http://www.autoadmit.com/thread.php?thread_id=5806858&forum_id=2\u0026mark_id=5085026#49489795) |
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Date: December 6th, 2025 5:41 PM Author: black at-the-ready athletic conference hospital I doubt actually. More likely that 400k/yr will be lower middle class then... so maybe I'll just roll my old job 401k into solo401k without conversion. Then I can still trade bitcoins and tqqq (http://www.autoadmit.com/thread.php?thread_id=5806858&forum_id=2\u0026mark_id=5085026#49489316) |
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Date: December 6th, 2025 1:11 PM Author: black at-the-ready athletic conference hospital Look at this:
Let's say you have 100k pretax 401k. You converted it to roth and paid 40k cash to irs from your savings.
Now you let that 100k grow into 1million over 20 years. You then either take it tax free or pay ordinary income tax on that million. Sure you would also have extra 40k in your taxable brokerage that could theoretically grow to 400k and equal to the value of that tax, but is that realistic? Each time you sell stock in the brokerage it's a taxable event. In roth I can buy and sell bitcoin and qqq limitless. Besides I'll have plenty in regular brokerage account |
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Date: December 6th, 2025 1:41 PM Author: black at-the-ready athletic conference hospital Actually the main reason to do 401k conversion now instead of later may be the choice of investment. 401k is whole market index. While in roth I can keep going in and out of qqq, tqqq, bitcoins.
It's true I could convert 401k at a lesser tax rate in the future but maximum difference would be about 13%, i.e. 24% versus 37%. So it's really a question about whether wholemarket index would outperform my personal investments in qqq, spmo, tqqq |
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Date: December 6th, 2025 2:09 PM Author: Bisexual judgmental heaven If you want to eat a huge tax hit so that you can gamble with bitcoins, you're almost certainly going to end up with far less money than if you simply left your money in an index fund in a traditional 401k. Something like 80% of professional money managers can't beat an index fund. LJL at an autistic doctor beating the market by gambling with high volatility assets. But it's your money, and you can do whatever makes you happy with it. (http://www.autoadmit.com/thread.php?thread_id=5806858&forum_id=2\u0026mark_id=5085026#49488753) |
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Date: December 6th, 2025 5:38 PM Author: black at-the-ready athletic conference hospital Lol money managers are fraudsters who trade other people's money of course they don't mind losing. On the other hand just putting $ into qqq or spmo is much better than whole market index. And u definitely should buy tqqq and bitcoins if there is a major crash (http://www.autoadmit.com/thread.php?thread_id=5806858&forum_id=2\u0026mark_id=5085026#49489306) |
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Date: December 6th, 2025 5:43 PM Author: Hateful indian lodge Why would you do a pretax 401k-roth as a doctor making 400k or whatever? (http://www.autoadmit.com/thread.php?thread_id=5806858&forum_id=2\u0026mark_id=5085026#49489322) |
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Date: December 6th, 2025 5:51 PM Author: black at-the-ready athletic conference hospital Better answer why not? The purpose of holding it pretax and not doing conversion is because you plan to convert it in small portions when you're older possibly in 24% bracket instead of 37%. But will roth conversion even be an option 10 or 20 years from now? Keep in mind that 24% is the absolute minimum tax rate, as I'll have other sources of income including additional 401k and 457k(that must be distributed) and taxable brokerage. So very possible the tax will be 32%+ anyway (http://www.autoadmit.com/thread.php?thread_id=5806858&forum_id=2\u0026mark_id=5085026#49489341) |
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Date: December 6th, 2025 6:20 PM Author: black at-the-ready athletic conference hospital Look at this calculation:
100k in 401k convert to roth and pay 37k from savings account now. Or wait until retirement when it is 500k and invest 37k in taxable brokerage which becomes 185k. In fact if I am in a lower tax bracket (30%), I will end up paying exactly the same. 500*.3 and 185k after capital gains tax is the same. If I am in the same tax bracket I will pay more. And if I don't invest that 37k I will obviously just be down by .3*500 |
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Date: December 6th, 2025 7:03 PM Author: concupiscible brunch tattoo think about this reply - the marginal tax rate is the only thing that matters http://www.autoadmit.com/thread.php?thread_id=5806858&forum_id=2#49488743
in your example i'm assuming a current marginal tax rate of 37% and in retirement of 30%. cap gains assume 15% even though the first $50k per year is %0.
100k in 401k convert to roth and pay 37k from savings account now. - so you have $500k in retirement - Or wait until retirement when it is 500k and invest 37k in taxable brokerage which becomes 185k. In fact if I am in a lower tax bracket (30%), I will end up paying exactly the same. 500*.3 and 185k after capital gains tax is the same. If I am in the same tax bracket I will pay more. And if I don't invest that 37k I will obviously just be down by .3*500 -- $500k*.7=$350k, + .85($148)+$37=$162.8 = $512.8k |
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Date: December 6th, 2025 8:07 PM Author: black at-the-ready athletic conference hospital Cap gains is 15+4%niit. That's still much less than income tax and this may be the first thing to be increased in the future. If my retirement tax bracket was the same 37% this calculation would not come out equal. And keep in mind this implies best case scenario, i.e. every last $ that I don't use to pay tax I invest and hold in taxable brokerage. (http://www.autoadmit.com/thread.php?thread_id=5806858&forum_id=2\u0026mark_id=5085026#49489736) |
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Date: December 6th, 2025 9:01 PM Author: concupiscible brunch tattoo OK now assume current marginal tax rate of 37% and retirement of 37%. cap gains assume 19%.
100k in 401k convert to roth and pay 37k from savings account now.
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so you have $500k in retirement
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Or wait until retirement when it is 500k and invest 37k in taxable brokerage which becomes 185k.
-- cap gains tax is $0 on the first $50k per year $500k*0.63=$315, + 1x($148)+$37=$185k = $500k
if cap gains is 19% yeah the math looks worse $500k*0.63=$315, + 0.81($148)+$37=$156.11k = $471.11k
and not sure why you think your retirement marginal tax rate would be 37%. if you have some flexibility you can take larger distributions in years when you don't have other taxable income |
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Date: December 6th, 2025 9:32 PM Author: black at-the-ready athletic conference hospital So you proved my point, despite the lower 19% capital gains tax you would get less if income brackets are the same. And in all likelihood I am not going to put extra 40k into brokerage just because I did not pay my tax bill. 0% cap gains does not apply because if my retirement income is 50k/yr I'll be living on the street... this 401k is in addition to whatever 401k I will accumulate in my new job plus my taxable brokerage. Basically my retirement income must be above 200k before considering this portion of 401k. (http://www.autoadmit.com/thread.php?thread_id=5806858&forum_id=2\u0026mark_id=5085026#49489960) |
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Date: December 6th, 2025 9:37 PM Author: concupiscible brunch tattoo ok brother good luck (http://www.autoadmit.com/thread.php?thread_id=5806858&forum_id=2\u0026mark_id=5085026#49489969) |
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Date: December 6th, 2025 8:10 PM Author: Canary Step-uncle's House Rigpig this is covered in the gemara (http://www.autoadmit.com/thread.php?thread_id=5806858&forum_id=2\u0026mark_id=5085026#49489741) |
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Date: December 6th, 2025 9:32 PM Author: black at-the-ready athletic conference hospital What's gemara (http://www.autoadmit.com/thread.php?thread_id=5806858&forum_id=2\u0026mark_id=5085026#49489961) |