Question:
I am over age 59½ and have had a Roth IRA account for more than 5 years. Starting in 2025, I designated all of my contributions into my employer’s 401(k) plan as Roth contributions. If I decide to retire before I have met the 5-year requirement for the Roth 401(k) and roll over this balance to my existing Roth IRA account, which 5-year clock applies to those former Roth 401(k) dollars?
Thanks for taking my question!
Lois
Answer:
Hi Lois,
The Roth IRA clock will apply. Since you are over age 59½ and you’ve had a Roth IRA for more than 5 years, any distribution from your Roth IRA (including all earnings) will be tax and penalty-free. That includes distributions of Roth 401(k) funds that you have rolled over.
Question:
Dear Ed Slott and America’s IRA Experts,
I have a rollover traditional IRA that was set up when I left my last job. I am no longer employed, so don’t have any earned income. My husband works full time and we file married/filing joint.
Can I contribute to a newly established traditional IRA account and then convert to a Roth IRA for tax year 2024? When I convert the contribution from the new traditional IRA to a Roth IRA, do I have to consider the assets in the rollover traditional IRA and calculate the taxes on a pro-rata basis? Or do I calculate taxes owed on the backdoor Roth using only the contribution from the new traditional IRA? Lastly, is this conversion strategy limited by income levels?
Thank you and looking forward to hearing from you.
Sincerely,
Anna
Answer:
Hi Anna,
Assuming your husband has enough compensation, you can make a spousal IRA contribution based on his compensation. However, it is too late to make a contribution for 2024. Since you are inquiring about a backdoor Roth IRA, I assume your husband’s income is over the married/filing joint threshold ($236,000 – $246,000 for 2025) for contributing directly to a Roth IRA. If you make a non-deductible IRA contribution for 2025 and want to do a Roth conversion, the pro-rata rule will require you to take into account your existing rollover traditional IRA. Therefore, a part of that conversion will be taxable. There are no income limits on doing Roth conversions.
If you have technical questions you would like to have answered, be sure to submit them to mailbag@irahelp.com, to be answered on an upcoming Slott Report Mailbag, published every Thursday.
The Roth 5-Year Clock and the Pro-Rata Rule: Today’s Slott Report Mailbag
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Specializing in private wealth management, we provide education, guidance, and strategies to help you achieve a tax-efficient retirement income.
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