Roth conversion

How often can I make a “backdoor” conversion from my 401(k) to a Roth? I was under the impression that it’s only once a year… but I don’t know where I got that impression from.

culcha

I think you can contribute up until April 15 2022 for 2021. Not number of contributions but total dollar amount.

Beware the pro rata rule.

culcha- <<How often can I make a “backdoor” conversion from my 401(k) to a Roth? I was under the impression that it’s only once a year… but I don’t know where I got that impression from.>>

A ‘normal’ Backdoor Roth IRA contribution involves contributing non-deductible money to a Trad IRA that has zero pre-tax money in it & then converting that money to a Roth IRA, with zero taxes incurred.

Correct me if I’m wrong, but what you’re describing seems to be either:

  1. a Trad 401k conversion to a Roth IRA
  2. a Roth 401(k) to Roth IRA rollover

These are very different animals, tax-wise. Which of the two are you proposing to do?

https://www.investopedia.com/articles/retirement/08/convert-…

How often can I make a “backdoor” conversion from my 401(k) to a Roth? I was under the impression that it’s only once a year.

Okay, let’s make sure you know the definition of a “backdoor” conversion from a 401(k) to a Roth, since you put it in quotes. There are actually 2 different versions:

  1. Moving after tax contributions in the 401(k) into a Roth subaccount that’s still in the 401(k).
  2. Moving after tax contributions in the 401(k) into a Roth IRA at a brokerage.

In either case, any earnings that the after-tax contributions have generated are also moved (on a pro-rata basis) at the same time - either into a Traditional account, which will not generate a taxable event, or into the Roth account, which will generate a taxable event.

Please note - movement of any pre-tax money into a Roth account (either in your 401(k) or an IRA) is NOT a “backdoor” conversion - it’s just a conversion.

How often you can do a backdoor conversion is dependent on your 401(k) plan rules. Some plans will automatically do a type 1 conversion for every paycheck contribution if you set it up to do so. Moving money out of the plan into an IRA is often more limited - sometimes those conversions are just allowed annually or quarterly, which has a greater chance of creating a taxable event.

AJ

I think you can contribute up until April 15 2022 for 2021. Not number of contributions but total dollar amount.

You are thinking of IRAs. The OP asked about converting after-tax contributions that are already in their 401(k). Conversions are done on a calendar year basis, and do not have a dollar limit, other than the size of the after-tax account in the 401(k).

AJ

Correct me if I’m wrong, but what you’re describing seems to be either:
1. a Trad 401k conversion to a Roth IRA
2. a Roth 401(k) to Roth IRA rollover

Actually, you can make after-tax contributions to your 401(k) account, if your plan allows them. Then, any conversion (be it to a Roth subaccount in the 401(k) or to an IRA) is still considered to be a backdoor conversion, although it’s typically called a ‘mega backdoor conversion’ since you can generally contribute more on an after-tax basis to your 401(k) (for 2022, it’s up to $61,000 minus any elective deferrals and any employer match, but not counting catch up contributions) than to an IRA. In that context, the OP’s question is perfectly valid and doesn’t describe either of the options you provided.

AJ